Utah continues to tax people whose incomes don't reach the poverty line, while the nationwide trend is to exempt such families.
Four years ago, the majority of states that impose income taxes levied them on three- and four-member families who lived below the federal poverty level. Now, the reverse is true, but barely, according to a Center on Budget and Policy Priorities report released Wednesday. The nonprofit research organization based in Washington, D.C., studies government programs and policies that affect low- and middle-income people.The report assesses the impact of each state's income tax on poor families for the 1999 tax year, focusing on income tax thresholds, or the income level at which a family would begin to owe state income tax.
Of the 42 states that assess income tax, 22 exempt married couples with two children who live at or below poverty level, estimated to be $17,028 annual income. Utah is among the 20 states that tax families who earn less than than that amount.
According to the report, Utah begins taxing a family of four when its income hits $15,500 and a three-member family at $12,600, both thousands of dollars beneath the poverty line.
That threshold ranks Utah 17th among the states that levy income tax.
Utah Issues, an advocacy group for low-income residents, is pushing to eliminate the tax burden for poverty-stricken families as other states have recently done, especially in light of welfare reform.
Changes in the welfare system have had a big impact on the number of low-wage employees in the work force, said Gina Cornia of Utah Issues. Job growth has been greatest in the service sector, which traditionally has offered lower pay and fewer benefits. Removing the income tax, Cornia said, heightens the incentive for welfare recipients to go to work.
The Utah Legislature, which sets the tax rates, has not redefined individual income tax brackets since 1973, said Janice Perry Gully, Utah State Tax Commission spokeswoman. The Senate approved a bill sponsored by Sen. Howard Nielson, R-Provo, to adjust the brackets this past legislative session, but the House sent it back to the rules committee.