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Legislative leaders plan to add child tax credit to special session agenda

By Lisa Riley Roche, Deseret News | Posted - Jul. 17, 2018 at 10:05 p.m.



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SALT LAKE CITY — Legislative leaders are planning a last-minute addition to Wednesday's special session agenda that would set aside $22 million to give Utahns with children a break on their state income taxes.

"We're dealing with all these corporate issues and business issues. We're doing online sales tax. We need to address family issues at the same time," Senate President Wayne Niederhauser, R-Sandy, said.

Details of the proposal, including the size of what is expected to be a child credit on state income tax filings, were still being worked out Tuesday, Niederhauser told KSL after a meeting with Gov. Gary Herbert about the tax break.

"We are striving to make sure that any adjustments are fair to individual taxpayers," Paul Edwards, the governor's deputy chief of staff, said when asked about the adding the issue to the special session.

Herbert is calling lawmakers into a special session at 2:30 p.m. Wednesday to deal with a long list of issues, including changes to the controversial Utah Inland Port Authority law agreed to under a compromise with Salt Lake City Council members.

Also on the agenda set by the governor is setting up the collection of nearly $60 million in online sales taxes starting Jan. 1 from companies that do not have a physical presence in the state as allowed under a recent U.S. Supreme Court ruling.

Another agenda item seeks to clarify that those proceeds will be used to give manufacturers a tax break, while other items allow for the collection of additional tax revenues from the $1.5 trillion federal tax cut bill passed by Congress late last year.

On Tuesday, the Legislature's Executive Appropriations Committee voted to adopt $22 million from some of the additional tax revenues, enabling the money to be used for the new income tax credit.

The action follows a push at a legislative committee meeting last week to find a way to help Utah families expected to pay more in state income taxes because the federal tax cut eliminates personal exemptions, valued at $4,050 each in 2017.

"We failed miserably last session to address that," Sen. Deirdre Henderson, R-Spanish Fork, said during last week's Revenue and Taxation Interim Committee's debate over using $6 million in new revenues for an earned income tax credit.

Although the committee recommended that credit for the working poor, the new proposal would use the $6 million from a change in how net operating losses are treated plus even more money to give more Utahns tax credits for their children.

The other revenues that would be used for the dependent tax break are $16 million expected from how corporate interest deductions and FDIC fees are dealt with under the new federal tax law.

House Speaker Greg Hughes, R-Draper, said the tax break is being tailored to the amount of money available. He said there was support but not the money needed during the 2018 Legislature for a larger credit with a nearly $60 million price tag.

"It came down to dollars," Hughes said, noting lawmakers did vote to lower the state income tax rate, from 5 percent to 4.95 percent, after acknowledging a windfall from the federal tax overhaul.

Now that funds have been identified for a more modest tax break, Hughes said lawmakers can mitigate some of the impact the federal tax cut will have on state taxpayers, particularly those with large families.

"If there is a way we can address the tax relief on the state side, we're looking at a lot of the business tax things tomorrow but families are at the forefront of our minds. If we can get that done, we want to do it," the speaker said.

Niederhauser agreed.

"I feel like there's enough momentum on this, let's do it now," the Senate president said. "I think by addressing it now under this scenario we can avoid addressing it in the next session," too late to affect taxes owed in 2019.

He said the tax break will give Utahns a credit on their income taxes for each of their declared dependents, an amount that will be smaller than the lost personal deductions.

Utahns "are still going to pay a little more state tax, and sometimes a significant amount, and this will help give some relief to those families. And that is our desire," Niederhauser said.

But combined with the federal tax cuts, both he and Hughes said most Utahns will end up with a lower tax bill overall starting next year.

Not on the table is a reduction in the state's 4.7 percent sales tax rate. Past legislation called for that rate to drop should the courts or Congress order all out-of-state companies to collect sales taxes on online purchases.

Last session, however, lawmakers decided to spend a chunk of that money to give manufacturers a tax break, about what's left to collect now that Amazon and other online companies are already voluntarily collecting sales taxes from Utah customers.

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Lisa Riley Roche

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