Utah lawmakers dropped the state’s income tax rate again this year.

The reduction in the individual and corporate state income tax rate from 4.65% to 4.55% adds up to nearly $170 million, slightly more than the amount set aside in December for an unspecified tax cut by the powerful Executive Appropriations Committee made up of legislative leadership.

The higher price tag is due to updated revenue forecasts showing an anticipated increase in income tax collections and the Legislature’s longtime Republican supermajority left little doubt they intended to continue to lower the state income tax rate. A tax cut was announced as a top GOP priority even before the session began in mid-January.

While this is the fourth year in a row that lawmakers have cut taxes in Utah, income tax rates were included in just the past three years. In 2022, the income tax rate was sliced from 4.95% to 4.85%, nearly a $164 million tax cut, and in 2023, from 4.85% to 4.65%, a $380 million reduction.

Gov. Spencer Cox said he is “very supportive of the tax cut. I think under the circumstances, with the budget as it sits right now, that’s a good number.”

Before the session started, Cox was talking about the need for legislative leaders to focus on getting rid of Utah’s income tax rather than keep reducing the rate. He told the Utah Taxpayers Association that “may be even better than just taking it down 10 basis points (a basis point is one-hundredth of 1%) or 20 basis points every year, just kid of slicing away a little bit at a time like that.”

Friday, the governor told the Deseret News he was just trying to encourage “a conversation” about what comes next for the income tax.

“There’s no way that we can eliminate the income tax. My point was in saying that was to start a conversation about what is the angle here? What are we trying to accomplish,” Cox said, adding that questions about what would replace the income tax, or how much more the rate should be cut if it stays, need to be answered.

“Those conversations are happening,” he said. “What I’d like to see is what’s the marker. Do we want to get down to 3.95%? Is that the marker? Is that what we’re looking for? I don’t know yet. These are conversations that are very deep and intense. It means economists coming together. It’s not just something that you put your finger up in the wind and pull a number out.”

It’s something “we have to be thoughtful about. My concern was that we’re not being as thoughtful about it,” Cox said. “Now, legislative leaders have agreed it’s time to come together. I know it’s more than 10 basis points where we want to go. We have to make sure the economy’s keeping up with that. But there has to be a plan in place.”

Senate President Stuart Adams, R-Layton, said work will continue on the income tax with an eye toward eventually joining the handful of states that don’t have an income tax.

“I don’t want to speak for the entire (Senate). We haven’t had discussions,” Adams said. “But I can’t imagine we won’t continue with what we’ve done in the past with the same effort. I think we’re trying to reduce the income tax to be competitive with other states. I’ve said forever, if there is a way, we’d like to try to actually remove the income tax.”

The Senate president said “if we can’t get there, that’s great. But we’re going to do it in a reasonable and rational way.”

Not everyone agrees that income tax cuts are a good idea. Democrats in both the House and Senate opposed another round of income tax reductions this year, saying the money should instead be used for more pressing needs in the state, such as child care and improving accessibility to social services programs.

“Most Utahns would agree,” Senate Minority Leader Luz Escamilla, D-Salt Lake City, said, especially given how much the majority of the state residents would see in tax savings. “Obviously, we had a wish list. I can mention 100 things that I felt needed to be funded.”

Related
Another tax break approved by the Utah Legislature

An analysis for a Utah advocacy group, Voices for Utah Children, found that Utah taxpayers who make more than $800,000 will pay nearly $2,700 less in income taxes, while the tax savings range from $24 to $67 for those earning $99,000 or less. That means nearly a quarter of the $170 million tax cut would go to the top 1% of the state’s earners.

The analysis is intended to “make sure people can understand just how much of this tax cut would be going to the wealthiest residents,” said Marco Guzman, a senior state policy analyst for the left-leaning think tank in Washington, D.C., that put together the numbers, the Institute on Taxation and Economic Policy.

Looking at all three years of the tax cuts, the differences between low- and high-income Utahns is even more dramatic.

Among the top 1%, who earn an average of more than $3.2 million annually, the tax savings from the income rate going from 4.95% to 4.55% adds up to more than $10,700, the analysis found. For the 95% of Utahns earning less than $307,500, the three years of tax cuts amount to total savings of between $90 and $694.

“It’s trickle-down economics by a different name. If we make rich people pay less in taxes, everything’s going to be better,” said Anna Thomas, policy director for Voices for Utah Children. “From our perspective, it’s not worth sacrificing the quality and availability of public services for what basically is a political talking point for legislative leadership.”

House Speaker Mike Schultz, R-Hooper, said lawmakers are trying to help all Utahns save on their taxes.

“Those that make more money pay more in taxes,” Schultz said. “But we’ve worked hard over the last couple of years. Part of those tax cuts have been Social Security. If you make under $75,000 a year combined with your spouse, you don’t pay Social Security tax any more. That’s big.”

Schultz said lawmakers have approved other changes to tax policy aimed at helping low-income Utahns, increasing the age limit for the child tax credit, a $2.3 million tax break, and last year, raising the earned income tax credit from 15% to 20% of the federal earned income tax credit, a $1.2 million tax break.

And in 2023, the Legislature agreed to remove the state sales tax on food if voters approve a state constitutional amendment ending an earmark on income taxes this November, the speaker said, four years of tax cuts that, altogether, add up to about $1.5 billion in savings for Utahns.

“We’re trying to get areas of all income levels,” Schultz said. “So that’s our goal.”

Correction: A previous version of this story said that the reduction in the individual and corporate state income tax rate was from 5.65% to 5.55%. It is 4.65% to 4.55%.