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- The Utah Legislature is advancing a nearly $100 million income tax cut.
- Critics argue it erodes financial stability and benefits corporations over families.
- Proponents claim it enhances Utah's attractiveness for businesses and economic growth.
SALT LAKE CITY – The Utah Legislature is moving ahead with a plan to cut the state's corporate and income tax rate for the fifth consecutive year despite pleas to spend the money on critical government services.
HB106, sponsored by Rep. Kay Christofferson, R-Lehi, passed out of the House Revenue and Taxation Committee Tuesday in an 8-2 party-line vote.
According to an estimate from the Utah Taxpayers Association, the tax cut would save a typical Utah family around $45 a year.
"It's a small amount," Christofferson told KSL following the committee hearing," but every year we cut that, it adds up."
A smaller tax cut
The committee voted to advance HB106, but only after halving the original proposed income tax rate cut. The bill initially sought to cut the rate from 4.55% to 4.45%, or about $195 million per year, but was substituted to split the difference at 4.5%.
Christofferson said the new bill's fiscal impact would be about half of the original proposal, or about $97.5 million.
Two Democrats on the committee voted against the bill. House Minority Whip Jen Dailey-Provost, D-Salt Lake City, said lawmakers are "eroding our financial stability going forward" with tax cuts each year.
"I just don't believe that you can convincingly make an argument that this tax cut helps actual families," Dailey-Provost said. "Families will not feel a lifted burden with this tax cut."
During public comment, multiple people urged the committee to instead spend the money on disability services, public education, infrastructure and social programs.
"While seemingly small, this reduction represents a significant revenue loss for the state and will disproportionately benefit large corporations and the top 5% of earners at the expense of Utah's many residents and critical public services," said Moe Hickey, executive director of Voices for Utah Children.
Republicans on the panel disagreed, arguing a tax cut helps the government live within its means and leads to broader benefits.
"As we continue to lower the tax rate, it does make Utah an attractive place for businesses to come and for people to come," said Rep. Joseph Elison, R-Toquerville.
In statements to KSL, top lawmakers in the House and Senate said the tax cuts will return money to everyday taxpayers.
"Utah's robust economy and steadfast conservative policies enable us to put money back where it belongs — into the hands of the people who earned it," said Senate President Stuart Adams, R-Layton.
"The cost of living continues to rise; by continuing to reduce the tax burden, we're ensuring that Utah remains a place of opportunity and prosperity for generations to come," added House Speaker Mike Schultz, R-Hooper.
Dueling proposals
Tax cuts have been at the top of the to-do list for many lawmakers since the session began, even as the Legislature has slashed around $1 billion in taxes over the past several years. The state's budget committee set aside more than $200 million for tax cuts late last year, though they didn't specify what that might be used for.
Gov. Spencer Cox, who touted past tax cuts during his recent reelection campaign, went into the session asking lawmakers to remove the state tax on Social Security benefits, an ask of around $143.8 million.
But GOP lawmakers seemed skeptical of the proposal since the start and have leaned toward another cut to the state's income tax rate. Democrats, however, have pushed to use the money to further fund state services, including expanding money for child care.
The entire picture was complicated last week when revenue estimates came in about $112 million lower than previous projections, putting a squeeze on the amount of money the state has to spend on other services. Although the state economy is expected to grow by about 3.5%, much of the increased revenue has already been eaten up by wage increases and higher per-pupil spending approved in the base budget passed earlier this year.
Top lawmakers have said tax cuts would remain an option, even in light of the decreased revenue estimates.
"Tax cuts will be on the table 'til we say they're not," Adams told reporters last week. "We took a lot of the money off the table in December, but there's still money there that we've set aside. We'll be evaluating what the needs are. And tax cuts are still on the table, but they're maybe a little harder to do right now."
HB106 now heads to the House of Representatives for consideration. Lawmakers have until March 7 to pass bills, and the budget committee convenes Friday evening to finalize recommendations for the coming fiscal year.
