clock menu more-arrow no yes

Filed under:

New federal tax law may not mean windfall for Utah coffers after all

Senate President Wayne Niederhauser, R-Sandy, speaks during the Utah Taxpayers Association 2018 Legislative Outlook Conference Monday, Jan. 8, 2018, in Salt Lake City. On the heels of a sweeping rewrite of the nation's tax laws signed by President Donald
Senate President Wayne Niederhauser, R-Sandy, speaks during the Utah Taxpayers Association 2018 Legislative Outlook Conference Monday, Jan. 8, 2018, in Salt Lake City. On the heels of a sweeping rewrite of the nation's tax laws signed by President Donald Trump in December, Utah lawmakers are still calculating how it will affect their plans to overhaul the state's tax system. A host of legislators offered broad outlines of some of the ideas they're kicking around during a conference of the Utah Taxpayer's Association, a tax watchdog group.
Rick Bowmer, Associated Press

SALT LAKE CITY — The new federal tax changes just passed by Congress may not mean a windfall in Utah income tax collections after all, Senate President Wayne Niederhauser warned Monday.

"I think everyone needs to understand that we're not sure," the Sandy Republican told an audience of lobbyists, lawmakers and others gathered for the annual Utah Taxpayers Association's Legislative Outlook Conference.

He said predictions of additional income tax collections, estimated earlier in the conference by House Speaker Greg Hughes, R-Draper, at between $75 million and $150 million, may not prove true.

"I can't explain it," Niederhauser told reporters after his remarks, saying he was "confounded" by reports of more money coming into the state and is waiting for an analysis of the impact of the $1.5 trillion federal tax bill.

Utah State Tax Commissioner Rebecca Rockwell said she, too, couldn't understand the talk.

"We've seen the numbers, but we have no idea where they're coming from. They're not coming from us," Rockwell said.

She said the tax commission was working with the Office of the Legislative Fiscal Analyst and Gov. Gary Herbert to figure out the actual effect and come up with consensus numbers.

Niederhauser said that may end up being "the status quo" and hopes to have the question settled in the next week or two. The 2018 Legislature is set to start Jan. 22.

The conference kicked off with Rep. Dan McCay, R-Riverton, saying he's planning legislation to decrease the state income tax rate to a "hold-harmless level so that we as Utahns get the full benefit of the tax changes in Washington, D.C."

Later, the speaker told the conference that lawmakers could choose to cut the state rate or spend all the additional money or "a blend of spend it all, cut it all."

House Republicans are scheduled to discuss the issue during a House caucus Wednesday.

Hughes said it's the "structure of the federal tax reform" that means Utahns will pay $75 million to $150 million more in state income taxes. "We're going to have that debate. And we'll all stayed tuned to see what that looks like."

Joseph Bishop-Henchman, executive vice president of the Washington-based Tax Foundation, said other states around the country are also still sorting out the effect, so it's no surprise it's still not clear in Utah.

"The bill was signed into law less than a month ago," he said. "That they have any idea at all means they were working over Christmas. So good on them."

More money could come in handy in the upcoming session, given that Senate Appropriations Committee Chairman Jerry Stevenson, R-Layton, said at the conference lawmakers face a deficit next year despite a $483 million surplus.

The reason, Stevenson said, is that much of that money — $382 million in onging revenue growth and $101 million anticipated to be left over from the current budget year — is already all but spent.

He pointed to the price tag for covering the cost of additional public school students, 2 percent salary and benefit boosts for teachers and public employees, increased Medicaid costs, paying off buildings under construction and other budget items.

All that adds up to a deficiency that will have to be made up by cuts somewhere else, Stevenson said.

One way to come up with more money, of course, is by raising taxes.

Niederhauser said he'd like to see lawmakers look at lowering the state's 5 percent income tax rate to continue to be competitive with other states, calling an ideal tax system one where "you lift all boats" by creating a more robust economy.

He said he doesn't expect lawmakers to address restoring the full sales tax on food because that's "not a big game changer" in terms of broadening the tax base, so "politically, there's no need to do that."

And while he said another increase in the gas tax would help offset $600 million now going to pay for roads from the state's general fund, the Senate president acknowledged that would be difficult, especially in an election year.

"Those are all big lifts for the Legislature. They're all politically charged so I'm not sure where we'll get during the session, but I think it's worth the effort to try and create a better tax system," he said.

Several speakers at the conference brought up the need to tax electric and other alternative fuel vehicles as well as bicycles that use roads, a policy recommended by the Legislature's Transportation Governance and Funding Task Force.