SALT LAKE CITY — Tax cuts for Utahns are on the table this session, but leaders of the Republican-controlled Legislature aren’t making any promises.
Both the House and Senate GOP caucuses are expected to look at a range of options at their Thursday meetings, including increasing the dependent exemption on state income taxes to offset the impact of federal tax changes on families and offering tax breaks on Social Security and military pension benefits.
But Senate President Stuart Adams, R-Layton, was hesitant to commit to giving Utahns some type of tax break before the 45-day session of the Utah Legislature ends on March 12, despite new revenue estimates released last week boosting the already sizable budget surplus by about $127 million, mostly in income taxes.
“It’s just on the table. It means we’re talking about it. It’s too early to tell,” Adams said Tuesday. “I think it’s always good policy to underpromise and overdeliver. So I think until we know, I don’t think it’s great to start rumors around that we may not deliver on. So we’re looking at it.”
House Speaker Brad Wilson, R-Kaysville, has said if there is a tax cut, he’d prefer it be a one-time income tax rebate.
“Permanent cuts are my preference but we may need to do something temporary until the state’s structural budget challenges are resolved,” Wilson said, adding, “we may decide that something one-time or with a sunset may be the right decision for this year. Time will tell.”
The speaker said tax cuts will be discussed by House Republicans this week but were not on the agenda for Tuesday’s caucus, which was closed.
Senate Republicans also didn’t talk Tuesday about tax cuts. Senate Majority Whip Dan Hemmert, R-Orem, said “there will be conversations” at the next midday party caucus on Thursday. But the topic did come up Tuesday at the House and Senate Republicans’ joint leadership meeting.
“There are a lot of budget concerns,” Hemmert said. “You know, the surplus illustrates, well illustrates, this structural imbalance we’ve been hearing about for so long. There is a recognition there’s a lot of money over in the education fund and there will be conversations.”
The tax reform package passed in a special legislative session in December that ended up being repealed last month was supposed to address the structural imbalance caused by growth in sales taxes lagging behind income tax collections as consumer spending shifts from goods to services. Lawmakers gave up on the tax reform package, which would have cut income tax rates and given families, low-income and elderly Utahns new tax breaks while raising sales taxes on food, gas and some services, after it appeared headed for rejection at the ballot as a result of a citizens referendum.
The tax reform package would have given Utahns an overall tax cut of $160 million, about double the amount initially set aside by lawmakers.
Legislative leaders have called repeatedly for waiting to tackle tax reform until the 2021 Legislature — after an election year for all of the House and about half of the Senate that will also produce a new governor of the state since Gov. Gary Herbert isn’t running for reelection.
But some lawmakers don’t want to delay giving Utahns tax breaks similar to those in the failed tax reform package.
“I think we need to do a couple of things,” said Sen. Curt Bramble, R-Provo, the sponsor of SB86, which would offer a credit for state income taxes owed on military retirement benefits, something that wasn’t in the tax reform package. He said lawmakers should also deal with Social Security benefits and increase the dependent exemption.
“Definitely something for Utah’s families that were hurt” by President Donald Trump’s federal tax changes in 2017 that eliminated dependent exemptions, leading to higher state taxes for many taxpayers, Bramble said.
“I supported the Trump revisions, believing we would fix the Utah side.”
He said he sees no reason to hold off on tax cuts until lawmakers are ready to tackle tax reform again.
“Tax reform is an issue of looking at the fundamental structure of our tax system, and looking, does it need to be modernized,” Bramble said. “Which I agree with. But that’s not dependent on whether we give some relief to families, or the military or Social Security recipients.”
The sponsor of the bill increasing dependent exemptions, HB260, Rep. Tim Quinn, R-Heber City, said he had hoped to discuss it at Tuesday’s House GOP caucus meeting because he won’t be there Thursday. He said he anticipates representatives will be asked what they “want to do because we’re not going to do them all.”
Other potential tax breaks could include HB193, sponsored by Rep. Susan Duckworth, D-Magna, that removes sales taxes on diapers along with feminine hygiene and incontinence products; and a tax credit proposed in a bill still being drafted that’s aimed at combating intergenerational poverty.
Senate Majority Leader Evan Vickers, R-Cedar City, said he can see both sides of the tax cut debate.
“You can argue, don’t do anything because we, No. 1, we have this imbalance,” Vickers said, noting income tax breaks take money out of the state’s education fund. Giving tax breaks now, rather than waiting until other aspects of tax reform can be considered, can also be seen as problematic, he said.
“If you’re going to do something, do you do all of one? Some of each? Do you do a general tax cut that would benefit everybody? Do you do dependent tax credits, Social Security and/or military that affects some but not all?” he asked. “These are all questions we’ve got to wrap around.”
Vickers said he has not heard any discussion about rebates, as the speaker proposed last week.
House Minority Leader Brian King, D-Salt Lake City, said there’s little interest among Democrats in taking money out of the education fund. Under the Utah Constitution, income taxes must be used for education, while the state’s other major revenue source, sales taxes, pays for much of the rest of the budget.
“Utahns, in the polling that I’ve seen, have said, ‘We don’t want, we don’t need a tax cut. What we’re trying to do is make sure our kids get the education they need,”’ King said. “I don’t understand why so many of my colleagues up here feel ... like the money is burning a hole in their pocket, and they’ve got to give it back to the people.”
Senate Minority Caucus Manager Derek Kitchen, D-Salt Lake City, said he’s not hearing tax cuts are a priority for many Utahns.
“They’re not like, salivating at the mouth for a tax cut,” Kitchen said of the Republicans, Democrats and independent voters he talks to. “I think while a tax cut sounds nice and it’s good to go out there and beat the drum, ultimately I think people are really just looking for a good use of legislative time and resources.