Utah leaders want 'historic' tax cut — but Gov. Cox balks at slashing income tax rate to 4.5%

Utah Gov. Spencer Cox told the Utah Taxpayer’s Association on Tuesday that he is not comfortable cutting the state’s income tax from 4.85% to 4.5%.

Utah Gov. Spencer Cox told the Utah Taxpayer’s Association on Tuesday that he is not comfortable cutting the state’s income tax from 4.85% to 4.5%. (Elise Amendola, Associated Press)

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SALT LAKE CITY — Utah Gov. Spencer Cox gave a swift and firm answer of "no" when he was asked at a tax watchdog's conference whether he supported a massive, $600 million cut to drop the state's income tax rate from 4.85% to 4.5%.

"No, it's not something I can get comfortable with right now," Cox told Rusty Cannon, president of the Utah Taxpayers Association at the group's annual Legislative Outlook Conference held Tuesday at the Grand America Hotel in Salt Lake City.

"I think that's too deep."

While both Cox and Utah's legislative leaders are intent on giving Utah taxpayers a significant relief in what could come in a variety of forms in 2023, Cox said it would be "reckless of me or anyone" to commit to such a large income tax rate reduction before first seeing the state's updated revenue projections set to be released mid-session, in February.

One only has to look at Kansas' failed tax cut experiment to know "what happens when you cut too deep," Cox said.

"In Utah, we measure twice and cut once."

The Utah Taxpayers Association has been advocating for an income tax rate cut down to 4.5%, arguing other states are leaps and bounds ahead of Utah in terms of income tax relief, and it's something state leaders should especially enact this year, given its over $3.3 billion budget surplus .

"Utah is falling behind," Cannon told the Deseret News in an interview before Tuesday's conference, pointing to Arizona's 2.5% rate, Colorado's 4.4%, as well as Nevada's and Wyoming's total lack of an individual income tax. "We were the cool kid on the block 15 years ago when we moved to 5% flat. We're no longer the cool kid on the block at all."

While Utah's state leaders do have a track record of supporting more moderate income tax cuts, it's not the only type of tax reduction that they have their eye on for the 2023 general session set to begin Jan. 17.

Even after two years of tax cuts that, when combined, marked the largest tax cuts in Utah's history, Cox said, "we certainly have an opportunity to do something much bigger and set the record for tax cuts this year by a significant margin."

Cox has proposed a roughly $1 billion tax relief package, which would include $300 million in new, ongoing tax cuts, $574 million in one-time tax relief, and maintain the expiration of the basic property tax levy freeze that's scheduled to expire this year.

The governor does support an income tax cut — just not one as big as the Utah Taxpayers Association would like to see. He's proposed dropping the state's rate down to 4.75%, which would cost the state $190 million. He's also proposing:

  • Giving $400 million back to taxpayers in the form of a one-time rebate, which would equate to $100 for individuals and households making up to about $39,000 per year and as much as $1,345 for those making more than $178,000 per year.
  • Making $250 of the Taxpayer Tax Credit refundable, meaning a household that has $500 in tax liability that qualifies for the Taxpayer Tax Credit of $750 would get the difference, $250, refunded in a check.
  • A new tax credit to allow an individual or family to claim a double exemption in the year of a child's birth, extending one dependent tax exemption for the child and another for the unborn fetus.
  • A $145 million one-time rebate on property tax expenditures, to address what the governor called "astronomical property valuation increases" that disproportionately impacted Utah homeowners in 2022 after two years of unprecedented home price increases.

Talks are also ongoing from last year's session on whether to repeal the state's portion of sales tax on food, as well as removing the constitutional earmark that reserves income tax dollars for public education, Cox said.

"We are going to have discussions about getting rid of the tax on food this session. That's definitely on the table," the governor said. "Those discussions are happening, and we're supportive of those discussions. We're also looking at removing the earmark."

But as Cox acknowledged during Tuesday's conference, his budget recommendation is only that — a recommendation — since legislators hold the purse strings.

Senate President Stuart Adams, R-Layton, and House Speaker Brad Wilson, R-Kaysville, have said all options are on the table, from one-time property tax rebates to expanding social security tax credits to even rolling back the state's portion of sales tax on food. Ultimately what package wins approval will be hashed out throughout the 45-day session. They have, however, expressed more interest in ongoing tax cuts than large, one-time cuts.

Last month, the Executive Appropriations Committee set aside $400 million to be spent on ongoing tax cuts this year, plus $145 million to cover the freeze on the basic school levy. That's simply a starting point for the rest of the legislative session.

Wilson made it clear to attendees Thursday that Utah was "certain" to see a "historic tax relief" during this year's session, whether that comes in the form of a tax rebate, income tax cuts, "targeted cuts," rolling back the state's sales tax on food, "or a combination of all of the above."

"We are in a very envious position, especially compared to other states around the country, some of which have historic budget deficits," Wilson said.

He credited the Utah Legislature for scaling back the budget dramatically amid uncertainty as COVID-19 hit the U.S. in early 2020, then being cautious with spending in following years.

"I'm confident that these trends of fiscal responsibility ... are going to continue," Wilson said. "But we cannot just cut taxes willy nilly."

Much of the state's revenue growth has been because the "federal government has been printing money, and that is not a sustainable path," Wilson said. Now, as a potential recession looms, he said lawmakers will need to "exercise caution at the same time as we provide record tax relief for Utah families."

Adams had a similar message. He, too, promised another year of record tax cuts, expressing concern that even though Utah enjoys a strong economy, he's worried about the state "losing our middle class." He said the Senate GOP is prioritizing investments in education — including boosting teacher salaries — as well as focusing on addressing Utah's housing affordability and water crises.

"Our future is bright," Adams said. "We're going to solve our problems like we always do in Utah."

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