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SALT LAKE CITY — Lawmakers approved giving Utah families a $30 million break on their state income taxes starting next year, a last-minute addition to Wednesday's special session agenda.
The details of the new tax credit, expected to reduce state income taxes owed by about $34 for each dependent, or around $170 for a family with five children, weren't finalized until just before the mid-afternoon session started.
"We thought we could do something good to help, and bring tax relief to some degree, and that's why we pursued it," House Speaker Greg Hughes, R-Draper, told reporters after lawmakers wrapped up the session in just a few hours.
The tax break amounts to a little less than half of the estimated impact of changes to the federal tax code on Utah families with more than two children earning between $40,000 and $80,000.
The $1.5 trillion tax cut approved by Congress late last year eliminated personal exemptions, valued at $4,050 each in 2017. Because Utah's income taxes are tied to the federal calculations, that means bigger tax bills for bigger families.
Senate President Wayne Niederhauser, R-Sandy, who was part of the closed-door discussions where the proposal was hammered out, said it was "going to be pretty sweet for people who have dependents."
The dependent credit was added on the House floor to a bill that changes how the state deals with net operating losses by businesses to conform to the new federal tax law. The bill now goes to Gov. Gary Herbert for his action.
The governor said in a statement he was "very pleased that as the Legislature harmonized our tax code with some recent major changes in national tax policy that they could help Utah's families avoid unanticipated income tax hikes."
During the 2018 Legislature, Rep. Tim Quinn, R-Heber City, tried unsuccessfully to get a bill passed aimed at helping families hardest hit by the loss of personal exemptions.
"Working class families didn't get a fair shot in Utah during the general session. We're doing everything we can to right the wrong." — Rep. Tim Quinn
Quinn said he was visiting his grandchildren in Atlanta when he got a call Tuesday that GOP legislative leaders and the governor were putting together a proposal for the special session.
"I was way shocked," Quinn said after making a quick trip back to Utah.
The bill he sponsored last session, which never got out of committee, would have set a dependent exemption of more than $3,000 and had a price tag of more than $60 million.
Quinn said while he was grateful lawmakers were willing to take another look at the issue, the $30 million tax break may not go far enough and an increase might need to be considered next session.
"Working class families didn't get a fair shot in Utah during the general session," he said. "We're doing everything we can to right the wrong."
Lawmakers first revived talk of taking care of families hit by the federal tax changes last week, when Sen. Deirdre Henderson, R-Spanish Fork, raised concerns during an interim committee hearing focused on corporate tax breaks.
Henderson, who said at that meeting lawmakers "failed miserably" last session to deal with the income tax impact on families, agreed Wednesday there may be more to do in the 2019 Legislature.
"We were able to scrape together and do what we could," Henderson said. "I hope that we'll be able to continue this discussion next session because I don't think we should be in any way penalizing people for having lots of kids."
The Deseret News reported Tuesday that $22 million was being set aside to create a child credit, using money from other impacts of the new federal tax law on how corporations handle net operating losses and deduct fees and interest.
But on Wednesday, legislative leaders decided to see if more money was available. Niederhauser said they were able to identify another $8 million left unspent during the 2018 session.
Another bill passed in the special session will also have an impact on the pocketbooks of most Utah taxpayers.
Lawmakers approved allowing an estimated $60 million in state sales taxes to be collected on online purchases from out-of-state companies affected by a recent U.S. Supreme Court ruling and clarifying a $55 million tax break for manufacturers.
The online sales tax collections will begin Jan. 1, although Amazon and a number of other retailers that have signed voluntary compliance agreements with the state are already charging Utah customers.
Those agreements are seen as bringing in more than half of the $200 million the state was believed to be losing from online sales. Utahns are supposed to be paying taxes not collected by retailers with their income taxes, but few comply.
The tax break for manufacturers was passed last session, contingent on the courts or Congress taking action. The court ruling spells out that business with no physical presence in a state can still be required to collect taxes from customers there.
While some states will start enforcing the ruling on October 1 to take advantage of holiday shopping, Utah will wait until the start of the new year to give retailers time to make the transition.
