House Democrats want wealthier Utahns to pay more in income taxes

House Democrats want wealthier Utahns to pay more in income taxes

(Scott G. Winterton, KSL, File)


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SALT LAKE CITY — Utah House Democrats offered their own tax reform plans Thursday, calling for imposing higher income tax rates those earning more than $150,000 and replacing the state sales tax with a gross receipts tax on businesses.

Their proposal comes as the Republican leaders of the Utah Legislature are preparing for Gov. Gary Herbert to call a special session on Dec. 12 to consider the plan being put together by the GOP-controlled Tax Restructuring and Equalization Task Force that cuts income taxes while adding new sales taxes to food, gas and some services.

The task force is set to meet on Monday to finalize the plan intended to give Utahns an overall $100 million tax cut. A number of groups have raised concerns about the impacts of the plan, especially on low-income Utahns and schools, since the Utah Constitution earmarks income taxes for education.

“It’s clear to us the public is not excited about the task force’s plan that’s currently proposed,” House Minority Leader Brian King, D-Salt Lake City, said. “We do need to reform our tax system, but we think we need to devote more time to getting this right.”

The Democrats’ plan would return the state to a progressive income tax system that imposes higher rates on higher earnings. Utah did away with that type of taxation a decade ago in favor of a single income tax rate, currently 4.95%.

Democrats would either keep that rate in place or drop it to 4.64%, but only on earnings up to $150,000. Money made above that amount would be taxed at 6% up to $250,000; 7% between $250,000 and $600,000; and 8% above $600,000.

Keeping the rate the same for Utahns making less than $150,000 would bring in an additional $466 million in income taxes, according to the data provided by House Democrats, while cutting the rate at the bottom of the brackets would still raise an additional $263 million.

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Replacing the 4.85% state sales tax with a 0.9% gross receipts tax on business earnings means the state would collect less general fund revenue, just under $3 billion in gross receipts taxes compared to nearly $3.2 billion in sales taxes.

Lawmakers are looking at tax reform because growth in state sales tax collections are lagging as consumer spending shifts from goods to services. The state’s general fund, that pays for everything but education, is largely made up of sales taxes.

King said a progressive income tax plan means “most hardworking Utahns will still see a tax cut, but wealthier Utahns would be asked to contribute a little more,” while making more money available for both public and higher education.

He said moving to a gross receipts tax “also gives most Utahns a huge tax cut on purchases, even as it preserves the solvency of the general fund” and labeled it “fairer and easier to understand and administer because businesses and activities would all pay a little.”

It is not clear whether the Democrats’ plan will be considered by the task force Monday.

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