clock menu more-arrow no yes

Filed under:

Tax windfall generating legislative plans for extra revenue

Some wonder if money best used to cut Utah tax rate

A panel of Utah lawmakers rejected a proposal Wednesday that would have required lobbyists to undergo annual anti-harassment training in order to be licensed to lobby at the state Capitol.
There's already a split among lawmakers over what to do about the up to $80 million in additional income tax revenue expected to pour into the state as a result of federal tax cuts unless the Legislature takes action.
Adobe Stock 

SALT LAKE CITY — There's already a split among lawmakers over what to do about the up to $80 million in additional income tax revenue expected to pour into the state as a result of federal tax cuts unless the Legislature takes action.

"I don't think we need to do anything," Senate President Wayne Niederhauser, R-Sandy, said Friday. "I see us having now about $80 million to deal with in some tax reform."

That money could be used to reduce the 5 percent state income tax rate to about 4.9 percent, he said, although other members of Senate leadership and the Republican caucus have yet to talk about the issue.

Senate Budget Chairman Jerry Stevenson, R-Layton, wasn't quite as eager to use the extra cash for a tax break.

"The could put a lot of money into education very quickly," Stevenson said, because under the Utah Constitution, income taxes must be spent on education. He said he wasn't sure lawmakers would get to changing tax rates this session.

Senate Minority Leader Gene Davis, D-Salt Lake, agreed spending on schools might be the best use for the additional state income tax revenues, although he also urged eliminating deductions available to Utah taxpayers.

"If we're truly committed to a flat tax in the state of Utah, let's do a flat tax," Davis said. He said he and many others in his Senate district pay more than the 3.8 percent effective tax rate statewide because they don't have as much to deduct.

Lawmakers could also make changes to state income taxes to help wage earners avoid paying more in state taxes because of the elimination of personal exemptions in the federal code, which affects the income reported on state returns.

The $80 million would come to the state if lawmakers don't give small businesses the same 20 percent tax break offered under the new $1.5 trillion GOP plan passed by Congress last month.

Other options, presented Thursday to the Executive Appropriations Committee by Utah State Tax Commission Chairman John Valentine, are giving the break to just small businesses that itemize deductions or extending it to those that don't, too.

Providing the 20 percent federal tax break to all small businesses that have what's known as qualified business income would reduce the amount of additional state income tax revenue expected next year to $25 million.

Niederhauser doesn't see a need for the state to provide the tax break.

He said offering it to sole proprietorships and others that don't file corporate returns would not be fair to companies that do file corporate returns since in Utah, both individual and corporate tax rates are the same.

"In Utah, we already have parity," Niederhauser said. The tax break was included in the federal tax plan passed by Congress, he said, because corporate tax rates were also being lowered.

Senate Majority Whip Stuart Adams, R-Layton, said Utah taxpayers need to know they likely will still pay less overall in taxes in 2019, thanks to the size of the federal tax cuts.

"I wouldn't want anyone to think their overall tax payment went up," Adams said.

House members also have a lot to talk about when it comes to dealing with the effects of the new federal tax changes.

"We're discussing and evaluating all the options," House Majority Leader Brad Wilson, R-Kaysville, said, which include everything from tucking away the cash in the state's Rainy Day Fund to using it for schools.

He said reducing the income tax rate "makes some sense" in helping offset the impact on taxpayers. A Tax Commission analysis found that a married taxpayer with three children making $70,000 would pay an extra $233 in state taxes next year.

"It’s a unique opportunity and a challenge," Wilson said. "At the end of the day these are taxpayer dollars, so whatever we do with them has to make a lot of sense and be good policy. It’s not our money."