Utah lawmakers took another step closer to approving a nearly $200 million tax cut this year, including a $160 million across-the-board income tax rate cut, a $25 million nonrefundable earned income tax credit, and a $15 million expansion for the state’s Social Security tax credit.
The Utah House on Wednesday voted 63-12 to approve SB59, a bill that the Senate approved earlier in the session that only included provisions to drop Utah’s income tax rate from 4.95% to 4.85%. House lawmakers added into the bill the earned income tax credit and Social Security tax cuts in a committee last week, looking to provide more “targeted” tax cuts to low- and moderate-income Utahns.
The bill now goes back to the Senate for consideration. It could be debated there as early as Thursday.
The tax cut bill cleared the House with several Republican lawmakers applauding the inclusion of what would be a first for the state of Utah — a nonrefundable earned income tax credit. They said it would better target Utahns on the lower end of the income scale while also incentivizing work.
“It’s the principle of no handouts,” the bill’s House sponsor, Rep. Casey Snider, R-Paradise, said on the House floor. “An individual has to contribute to society if there is an expectation of having something returned.”
“It’s a good bill,” Snider said, though he added he doesn’t “love every piece of this with uniformity.” He said the bill was drafted out of compromise, and that not everyone is completely happy with its final product.
“But what we’ve crafted here is fair, it’s equitable, it extends across all income brackets, and it makes everybody equally happy and unhappy,” he said.
What does the tax cut include?
Here’s what’s in SB59:
- As currently drafted, SB59 would drop Utah’s income tax rate from 4.95% to 4.85%. Impact to Utahns would proportionately depend on income levels, but for a family of four making $72,000 a year, the cut would mean about $98 more a year.
- The nonrefundable earned income tax credit would give extra relief for low- and moderate-income working Utahns by allowing them to qualify for a state match equal to 15% of the amount of the federal earned income tax credit, according to its original bill HB307. The amount they would receive back would depend on family size and income levels, but for a family of four with a yearly income of $31,000, the state earned income tax credit match would give them an extra $266 in their tax return, according to bill sponsor, Rep. Mike Winder, R-West Valley City.
- The bill has also absorbed HB53, sponsored by Rep. Walt Brooks, R-St. George, to expand the state’s Social Security tax credit. It would result in an average annual tax savings of approximately $210 for an estimated 71,257 Utahns in tax year 2022, according to the bill’s fiscal note.
Legislative leaders from both the House and Senate have said the earned income tax credit and Social Security bills are the tax cut proposals that GOP caucus members most prefer.
Both bills took shape in closed-door caucus meetings as Republicans have favored them as add-ons to an income tax rate cut — more so than Gov. Spencer Cox’s recommendation to give Utahns a tax cut in the form of a $160 million grocery tax credit, and decidedly more than Democrats’ and poverty advocates’ preference to repeal the state’s portion of the sales tax on food.
House floor debate
Some Democrats tried to amend the bill to their preferences. Rep. Joel Briscoe, D-Salt Lake City, attempted to change the earned income tax credit from nonrefundable to refundable, which he said would allow taxpayers to get more back.
Specifying that the earned income tax credit is nonrefundable — not refundable — ensures taxpayers only receive back what they’ve paid in taxes. If it were refundable, they would be eligible to receive the full amount of the tax credit regardless of their tax liability.
A refundable earned income tax credit would better target working families on the lower end of Utah’s pay scale, Briscoe said. But his proposal failed on a voice vote.
Rep. Rosemary Lesser, D-Ogden, also tried to amend the bill to, instead, repeal the state’s portion on the sales tax on food — a proposal that she and Rep. Judy Weeks Rohner, R-West Valley City, have been pushing this year even though legislative leaders have said there hasn’t been support for it among the GOP majority this year.
Repealing the state’s sales tax on food, Lesser argued, would give low-income Utah families “immediate relief,” especially those who are already living paycheck to paycheck.
But Lesser’s amendment also failed on a voice vote, as House Republicans — and some House Democrats — favored Snider’s version of the bill.
“I think in this bill we have found the right balance,” said Rep. Robert Spendlove, R-Sandy. “It literally gives some tax relief to every single taxpayer in the state of Utah.”
In the Senate, Republican legislative leaders told reporters in a media availability after the bill cleared the House that it’s possible the bill could be heard as soon as Thursday afternoon.
The bill’s sponsor, Sen. Dan McCay, R-Riverton, stopped short of saying the Senate would likely pass the revised bill, adding that he’d prefer to “spend some time with my colleagues and make sure everybody understands what it is.” However, McCay said he thinks there’s generally support in the Senate for the “concepts and principles” in the House’s version.
Speaking for themselves, Senate President Stuart Adams, R-Layton, and Senate Majority Leader Evan Vickers said they’re supportive of the House’s changes to include the nonrefundable earned income tax credit and expanded Social Security tax credit.
“We knew that the House was going to add some things,” Vickers said. “We’ve allowed them to have the flexibility and freedom to do that, and we’ll look at it when it comes back. But like Rep. McCay I don’t want to get ahead of everybody.”
McCay chimed in, asking to “correct” one thing Vickers said. “We didn’t allow the House to have their flexibility, we respect their flexibility.”
Vickers thanked McCay, adding, “We knew that the House wanted to make some changes, and we were certainly agreeable to that.”
Contributing: Bridger Beal-Cvetko