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SALT LAKE CITY — Utah lawmakers are moving swiftly to cut Utah's income tax rate.
One of the Utah Legislature's first orders of business — after clamping down on local COVID-19 restrictions in the first days of the session — has been to advance a bill to reduce Utah's income tax rate from 4.95% to 4.85%.
The Senate on Friday voted 22-5 to approve SB59, which would use the full $160 million lawmakers have already set aside for a 2022 tax cut.
It now goes to the House, where lawmakers are expected to add to the tax cut package. Under consideration is an additional $40 million to possibly increase Utah's Social Security tax credit and to create an earned income tax credit focused on reducing the income tax rate even more, specifically for lower income Utahns.
House Speaker Brad Wilson, R-Kaysville, told reporters in a media availability Friday that he expected SB59 to be prioritized on a committee agenda early next week.
"I think you will see the House probably adding some additional tax cuts to the tax bill, and those will be targeted more to some of our lower-income individuals or our retirees," Wilson said.
While Democrats and poverty advocates have been pushing for a full repeal of Utah's sales tax on food and Gov. Spencer Cox has proposed a grocery tax credit, lawmakers are expected to go a different direction. Wilson said it's not likely either proposals will find traction in the House.
"But I think we've got something the governor feels pretty good about," Wilson said, though he added, "we're still working through some of the details on that."
SB59's bill sponsor Sen. Dan McCay, R-Riverton, said on the Senate floor that the House is expected to add "some additional components" to the income tax cut bill.
"I believe that we'll see in the House some measures to make changes to Social Security tax, to increase that tax credit, and for the first time in the state of Utah we might be in a position to create an earned income tax credit so that this rate can be focused on getting the income tax rate reduced specifically for those that are most in need," McCay said.
That is what's expected to be debated in the House. But for now, the Senate has set the stage with SB59 for an across-the-board income tax cut for Utahns.
The amount of the tax benefit will depend on individual and family income, but for a family of four making Utah's median income of about $72,000, the cut as it stands now would mean about $98 more a year, according to the bill's sponsor, Sen. Dan McCay, R-Riverton.
The Utah Legislature's GOP majority has been criticized for both not reducing taxes enough and for cutting taxes rather than directing the money to programs for the needy.
McCay acknowledged those who have said "we're not going far enough."
"I, like them, I feel the drive to drive the rate lower," he said, but added lawmakers want to cut taxes in a "measured, conservative way" and "make sure it's going to be healthy and we can support our education needs ... across the state and at the same time have a rate that isn't too onerous to our population."
If the 2022 tax cut passes muster, it will mark the second year in a row lawmakers slash taxes. Last year, lawmakers approved a $100 million tax cut package targeted at families with children, veterans and senior citizens — while leaving the door open for an income tax cut in 2022. The last time the Legislature cut the state's income tax rate was in 2018, when it approved a reduction from 5.0% to 4.95%, which cost the state $56 million.
"Over the last few years, the Legislature implemented significant tax reductions," McCay said in a prepared statement issued after the Senate vote. "Because of conservative, fiscally sound policy, our state is in a position to reduce taxes across the board. Income tax is burdensome on Utah families and a targeted approach to giving income tax relief will benefit all Utahns."
The Senate voted to approve the income tax cut bill despite pushback from some Democrats, who argued the state should be using that money for critical needs in education, social services and other programs.
"We have a large need" for colleges and K-12 education, Sen. Kathleen Riebe, D-Cottonwood Heights, argued on the Senate floor. "I think this would be a really great opportunity, instead of lowering the income tax to really start investing in the people in our communities and the people that are going to school."
Riebe said especially now, amid the COVID-19 pandemic, Utah has "a lot of unmet needs right now and I think that this is not the time" to cut taxes.
Others including Senate Minority Whip Luz Escamilla, D-Salt Lake City, argued against cutting taxes this year, saying economists have warned of the possibility of an economic "bubble" that could give way to a recession.
"A couple of years from now (lawmakers) are going to be sitting here ... and we're going to do budget cuts," Escamilla said in a Senate leadership media availability with reporters immediately after the vote. "I mean, I think we need to be very careful. And this bubble of a lot of the surplus comes from a very unique situation that the pandemic created with the stimulus money. That's my concern."
Republican Senate leaders, however, argued they're taking a measured and cautious approach to funding the tax cut while also prioritizing other priorities including education.
"We are taking steps to reduce the burden on working Utahns while finding a balance to increase education funding," said Senate Majority Whip Ann Millner, R-Ogden. "This year, the Legislature plans to cut taxes for Utahns while funding education at historic levels. We are deliberately decreasing taxes at this amount and will continue to assess the budget as federal stimulus stabilizes."
