Opinion: Why we passed tax cuts for Utahns
While the government can always find something to do with tax money, there is a significant benefit to keeping those funds in the hands of the people who earned it, rather than in government coffers
As the 2022 general legislative session began, the Legislature was determined to help Utahns by leaving more of their hard-earned money where it belongs: in their family budgets.
Now, halfway through the 45-day session, the House, the Senate and the governor have made good on that commitment through a bipartisan tax cut bill.
Tax policy is one of the most complex issues we deal with on Capitol Hill. Every adjustment has a ripple effect triggering a series of outcomes — many of which are difficult to predict. Cut taxes too much too quickly and an increase may be necessary down the road. Nobody wants that.
On the other hand, collect more than you need for too long and government inevitably grows its “needs” to fit its means.
Determining that tax policy sweet spot is further complicated today as the federal government prints money with reckless abandon and pumps it into our state, making it difficult to distinguish between real economic growth and inflation.
Utah is well-positioned to make tax cuts, but those cuts must be done carefully so we aren’t making long-term decisions based on short-term increases in revenue. Over the past decade, Utah has seen significant economic growth, which has led to increased tax revenue. Income tax revenue per capita has jumped from $814 in 2011 to $1,828 last year. That has allowed our state to increase funding for education by a record amount while bolstering our rainy day fund and investing in roads, transit and generational projects like the Inland Port and Point of the Mountain.
While the government can always find something to do with tax money, there is a significant benefit to keeping those funds in the hands of the people who earned it, rather than in government coffers.
Tax relief this session comes in three parts.
Income Tax Rate Cut
First, the Legislature reduced the income tax rate to 4.85%. By design, this is a modest cut that is applied equally to all taxpayers. While that is the fairest way of implementing tax relief, by itself it doesn’t achieve all of our policy goals.
Earned Income Tax Credit
We also targeted relief to the people who need it most through an Earned Income Tax Credit. Here’s how it works: Utahns who earn less than $57,414 a year will be eligible for a 15% state match of the federal earned income tax credit.
The EITC gives those who earn the least a benefit that makes a real difference to their budget. Utah’s Legislative Fiscal Analyst estimates the average Utah EITC recipient will save about $200.
Social Security Income Tax Credit
The third element of the plan is a Social Security tax cut, which builds upon the credit we passed last year. Under the new plan, all Social Security income is tax-free for those making up to $37,000 for individuals, and $62,000 for those filing jointly.
The result: More people who rely on Social Security benefits and live on fixed incomes will be eligible for tax relief.
Critics of the tax reform plan were either premature in their naysaying or willfully looking at only part of the overall effort. Taking the entire package of tax cuts into consideration shows that legislators are serious about decreasing the tax burden on all Utahns and targeting relief to those who need it most.
It’s also worth noting these changes come on the heels of tax cuts adopted by the Legislature just one year ago. Good tax reform rarely comes in one shiny package in a single year.
Utah has a long history of good tax policy that brings benefits to Utahns and our economy. This bill continues that tradition and, going forward, we will keep looking for ways to put more money back into your pockets.
Just this week, Utah was ranked atop another major publication’s economic rankings, and things are about to get even better.
Brad Wilson, a resident of Kaysville, is the Speaker of the Utah House of Representatives.