SALT LAKE CITY — Income tax rates would drop slightly and corporations would get a tax break under a bill advanced Thursday by a House committee that now embodies pieces of a Republican leadership tax package that is still in the works.
HB355, sponsored by Rep. Dan McCay, R-Riverton, would drop the state's 5 percent individual and corporate income tax rate to 4.95 percent and would switch to a single sales factor formula for corporate taxes.
The House Revenue and Taxation Committee approved sending the bill to the full House 6-2, with House Minority Leader Brian King and House Minority Whip Joel Briscoe, both D-Salt Lake City, opposed.
Both the rate cut and the single sales factor formula are part of the ongoing private discussions between House and Senate majority leaders about how the state should use an anticipated $80 million windfall from the new $1.5 trillion federal tax cut.
"One of the primary benefits of this is that it restores that revenue back to the taxpayer," McCay told the committee. He said lowering Utah's income tax rate below 5 percent removes an "important hurdle" for companies looking to relocate.
King said education and other services paid for with tax dollars are also key to attracting economic development. He said officials need to recognize Utah is attractive to companies regardless of the tax rate.
"We are underselling Utah when we say our taxes have got to be as low as they can be to attract anyone," the minority leader said, adding he was "not saying to sock it to people because they're going to come to Utah regardless."
Briscoe wanted to know what the point of the reduction is.
"Is this just a scorecard, is this just a notch in a belt, a bragging right? What will it do for the economy?" Briscoe asked.
McCay said that Utah needs to maintain its competitiveness.
"If we turn around and keep our rates high and bite the hands that feeds us, that would be unproductive," he said. "We are doing well, and I would like to continue that trend."
Also on the table as part of the leadership tax package is freezing the basic property tax rate, expected to generate tens of millions of dollars in revenues for schools through inflation.
McCay's bill, which had been heard before and held by the committee when it simply lowered the tax rate to 4.925 percent, was substituted in committee to incorporate phasing in the new corporate tax formula over two years.
The revised bill sets a higher tax rate but still one below 5 percent. The new corporate tax formula, seen as encouraging companies with Utah ties to invest more in the state, is expected to cost $16 million annually when fully implemented.
Under the new formula, companies would use only sales in Utah to determine their taxes. The past formula weighed payroll and property equally with sales to calculate taxes owed in the state.