Heading into the 2022 Legislative session set to kick off next week, lawmakers are already lining up with proposals to slash taxes for Utahns.
There will be plenty of debate during the 45-day session before lawmakers decide what to do — but there is early, widespread support among Utah’s GOP-supermajority Legislature for at least some kind of a tax cut.
The question is, what form will the tax cut take? And for how much?
An across-the-board income tax rate cut already has favor among several Republican lawmakers, including leadership. So far three different bills sponsored by Republicans have been filed to lower the state’s income tax rate from 4.95% to 4.9%, 4.75% or 4.6%.
A legislative leader, Senate Majority Leader Evan Vickers, R-Cedar City, is proposing the most modest reduction, down to 4.9%, which would cost the state about $78.5 million a year.
It’s far too early to say which proposal will win favor with the full Utah Legislature by the end of the session in March, but Senate President Stuart Adams, R-Layton, told the Deseret News on Wednesday he’s “inclined to do an income tax cut.”
“You may remember in 2021 I announced it was the year of the tax cut,” Adams said, harkening back to when the Legislature approved a $100 million tax cut package targeted at veterans, seniors and families with children. “What I’m saying now is that 2022 is the year of the tax cut — again.”
Lawmakers have already set aside $160 million — the same amount Gov. Cox has proposed in his recommended budget to use for a refundable grocery tax credit — for some form of a tax cut this year.
Adams said he favors the income tax cut approach rather than Cox’s proposed grocery tax credit because an income tax rate cut would benefit all Utahns and because it would align Utah with the at least 14 other states that have cut income taxes over the last year.
“In order to remain competitive, in my opinion, we need to do an income tax cut,” Adams said.
House Speaker Brad Wilson, R-Kaysville, also said he supports a tax cut during the Utah Taxpayer Associations 2022 legislative outlook conference on Wednesday, though he didn’t talk specifics.
“We all feel the state of Utah feeling less affordable and more expensive to live in,” Wilson said. “We need to make sure the policies ... make that problem better, not worse. And that really needs to be a focus for us.”
“One of the best ways for us to do that,” Wilson added, “is to ensure that tax policy lets more people keep more of their money and spend it the way they want and the way they need to.”
The Executive Appropriations Committee voted last month to set the $160 million aside when it set the base budget for the 2022 general session, using revenue estimates that projected the state will have $930 million in new ongoing funds to spend. After setting the base budget, lawmakers have another $219 million in ongoing funds and over $1 billion in one-time funds available to spend this year.
While the governor favors using $160 million for a grocery tax credit — which he argues will provide a “much larger benefit for the poor” compared to an income tax rate cut — Vickers, SB59’s sponsor, said the Senate GOP caucus is “very supportive” of cutting the state’s income tax rate.
Vickers said legislative leaders also support other tax cut proposals, “but an income tax cut seems to be No. 1.”
Vickers’ bill would be the smallest tax rate cut for Utahns. He said he proposed that number to start with a “modest cut,” but if lawmakers used all of the $160 million that’s set aside, that would drop the rate to 4.85%.
“My guess,” Adams said, “is 4.85% will be where we land.” However, he added it’s possible lawmakers could allocate more than $160 million for a tax cut.
Senate leaders “tend to prefer to take an approach where we’re doing smaller cuts,” Vickers said. “Now, 10 points is a pretty good cut. But I know some are proposing ... even lower. But we feel like it would be better to take it more incremental.”
Vickers said it’s possible to “take a chunk this year, and then if there’s money available next year we’ll do a little bit more over four or five years rather than one big cut.” That would put the state in a more stable position if the economy were to take a turn for the worse, he said.
“So we’ll probably modify that bill as we start the session to move in that direction,” Vickers added. “And then we’ll still have some discussions about what the governor is proposing” for the grocery tax credit. He also noted there’s been some discussion about further reduction in social security and military retirement tax, “although we’ve taken care of most of that.”
Asked how Senate leadership feels about Cox’s grocery tax proposal, Vickers said “our caucus would prefer to look at income tax first.”
“We haven’t done income tax in the last couple of years,” he said. “We’ve done some significant tax reductions but it hasn’t benefited across the board, so we feel like it’s time to look at the income tax this year.”
To Cox’s argument that a grocery tax credit would provide a larger benefit to low-income Utahns, Vickers said an income tax cut would “benefit everybody.”
“If you’re talking dollar amounts, then yeah, people who make more are going to see a bigger dollar reduction,” he said. “But on the same token, if you’re talking a percentage, that percentage to a middle- or low-income individual or family is still significant in their budget. So we feel comfortable going that direction.”
It’s possible Utah might see a combination of what lawmakers and Cox are proposing.
“Everything’s on the table,” he said. “It’s a long session.”