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SALT LAKE CITY — Utah taxpayers could be in for a break as legislators are again weighing options for distributing the $80 million they previously set aside to lower taxes.
"One of the exciting opportunities that we have as a state is to look at a tax cut this next session and doing something during these difficult times for a lot of our citizens," House Speaker Brad Wilson said Monday.
"But with the storm clouds out on the horizon we decided to tap the brakes on that in March of last year, and preserve that revenue just to make sure that we knew what we were dealing with as this pandemic kind of rolled in across the world," the Kaysville Republican told lobbyists, legislators and others gathered for the annual Utah Taxpayers Association Legislative Outlook Conference.
Many legislators now believe "it's time to return that revenue back to the citizens of this state and let them decide how they want to spend their money instead of the Legislature deciding how to spend it," according to Wilson.
He said the House will work with the Senate and Gov. Spencer Cox's office to decide what to do with the money. They are considering using it for Social Security or military tax reductions, possibly restoring part of the dependent exemption or an overall rate cut.
Cox announced on Monday at a separate news conference that he wants the $80 million surplus to go toward a Social Security tax credit for low- and middle-income senior citizens and a dependent tax credit for Utahns who were hurt by federal tax changes in recent years.
Rusty Cannon, president of the Utah Taxpayers Association, said the group recommends the state use the $80 million ongoing surplus to cut income tax for Social Security recipients and military personnel, and to restore more of the dependent exemption.
Utah's "blended" approach for responding to the pandemic — allowing businesses to stay open with added safety measures — also led the state to have a $1 billion one-time surplus while other states like California and New York have deficits in the billions, noted Senate President Stuart Adams, R-Layton.
The taxpayers association wants the state to use the $1 billion surplus to cut personal and corporate income tax from 4.95% to 4.75% for 2021 and 2022, which would use 25% of the surplus. The state should make the tax cut permanent if state revenue to the general fund reaches at least $8.7 billion at the end of fiscal year 2022, according to the group.
"I believe the 2021 legislative session is the year of the tax cut," Adams said.
"There's also a need to look at productivity. We know that when you tax productivity, you get less of it, and I think we need to look to see, and I think the taxpayers association is coming up with ideas of how we can actually reduce the tax on productivity," Adams said.
Dan Hemmert, former state senator and current executive director of the Governor's Office of Economic Development, emphasized the need in Utah for policy that prevents "tax pyramiding," which is when one pays sales tax "the whole way up" along the production process rather than on a final product.
It's an issue in areas like the software and service industries, according to Hemmert.
"It is something that Utah could do that could make us flash. It would be newsworthy if we very aggressively went after eliminating the tax pyramiding that is still occurring in our sales tax infrastructure," Hemmert said.
Adams said lawmakers this session will also likely focus on a more equitable distribution of education funding.
"We need to make sure that parents have more control of their education funding dollars also," Adams said.
In greater numbers than ever, people are coming to the Beehive State from all over the United States during the pandemic, according to the senator, meaning infrastructure will also be a major issue as "people have found Utah."
"We need to take care of our infrastructure. Things like double-tracking FrontRunner, expanding our fiber networks. That's a big deal, to be able to communicate. Water, water's probably a limiting factor on our growth, and of course road construction," Adams said.
Road usage charge program
During the conference, the Utah Department of Transportation shared updates on its work to implement a road usage charge system in the state as the tax on gasoline becomes a less effective funding source.
"We believe that the gas tax, it's been around 100 years ... but it's been a really good function for us," said Carlos Braceras, executive director of UDOT. "But it's not going to support us in the next 100 years."
Due to technological advances like hybrid vehicles, the gas tax is becoming less of a representation of how much the roads are used, Braceras said.
"And so we think it's important, to as we move toward a road usage charge program ... that we consider the pace at which we transition into this, we consider options for those who are going to enroll in it, and we consider what technology is utilized as we implement that," Braceras said.
Along with other Western states, UDOT has been researching a program to charge for road usage.
In 2020, UDOT implemented a pilot program that drivers of hybrid, electric and plug-in hybrid vehicles could voluntarily opt into to pay fees based on the miles they drive, waiving the yearly fee. It marked the first program of its kind in the country, Braceras said, and enrollment numbers surpassed expectations.
But few vendors currently exist that can provide the technology to the state to implement a widespread road usage charge plan. UDOT is putting together plans to be able to put a program in place throughout the state by 2031, Braceras said.