Just eight months after Utah lawmakers slashed about $1 billion from the state’s budget to steady an economy reeling from the pandemic, some are now starting to cautiously discuss cutting taxes.
Legislative leaders have been surveying their members about priorities and, with the economy appearing to recover much faster than anticipated, one question is aimed at gauging whether there is an appetite for tax relief in the upcoming session.
“We have been talking about some sort of a tax cut for the last couple of years,” House Majority Whip Mike Schultz, R-Hooper, says. “We are just seeing if there is still some support for that and, if so, how much support.”
In 2019, lawmakers set aside $80 million to pay for tax relief as part of the failed effort to overhaul Utah’s tax system. That money still has not been spent, and there’s a growing sense among some on Capitol Hill that the time may be ripe to put the money toward one, or a number of measures to cut some taxes.
Lawmakers could throw approximately $15 million toward expanding a state tax credit for retirees on Social Security, an idea under consideration for the past few years.
There’s also discussion of fixing the state’s dependent exemption, which was thrown off when Congress passed the Trump tax cuts in 2017. Changes on the federal level eliminated the per-dependent state tax exemption for many Utahns, which turned into a de facto tax hike.
There could also be some sort of tax relief for military members or even just a straight cut to Utah’s overall income tax rate, currently at 4.95%.
“It’s still very much a fluid conversation,” says Rep. Jefferson Moss, R-Saratoga Springs, who sits on the Legislature’s top budget committee.
“We want to find out what options are on the table, then figure out what we might be able to hodgepodge together.”
The only reason lawmakers can have these conversations are growing indications that the state’s economy is rebounding more quickly than believed. Sales tax collections are trending ahead of projections, mostly because of an increase in online purchases during the pandemic. Income tax collections are up, too, as Utah’s unemployment rate remains far below the national average.
Another big lift for the economy has been federal stimulus money pouring into the state. When you factor in direct payments, increased unemployment benefits, small business loans and other sources, it’s estimated the state has seen between $10 billion and $12 billion in direct and indirect economic benefit. With another round of stimulus checks coming soon, that will provide even more of a boost.
Earlier this month, legislative leaders voted to put $400 million in new spending toward education in the base budget. That money includes bonuses for teachers and school staff as well as replaces an increase in education spending that was cut from the budget earlier this year.
Despite the anticipated rosy revenue picture, lawmakers are still wary it could be a federal stimulus mirage. As a safeguard, they’ve shifted about $450 million in ongoing money to one-time status in case it evaporates after the federal money is used up.
“Even with that, we’re still looking at pretty healthy revenue numbers,” said Moss. “That’s why we’re doing so much with education right out of the gate in the base budget. But, we’re still being careful that it might not be as smooth of a ride as we hope, but there’s lots of optimism.”
