Lawmakers consider further tax cuts after projected $3 billion budget surplus for 2023
The Utah Capitol in Salt Lake City is pictured on 9/11. State lawmakers are already discussing proposed tax cuts for the 2023 general session of the Utah Legislature. (Scott G Winterton, Deseret News)
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SALT LAKE CITY — State lawmakers are already planning further state income tax cuts, after a report predicted the state could have more than $3.3 billion in budget surplus next year.
Last week, during the last full week of interim meetings before the January 2023 general session, the Utah Interim Committee on Revenue and Taxation approved law Project this would reduce the state income tax rate from 4.85% to 4.8%.
Bill arrives less than a year after legislature approved a $200 million tax cut this winter, and is probably the first proposal of many to further reduce the tax burden on Utahans.
Sen. Curt Bramble, R-Provo, said so during the committee meeting Wednesday, asking other lawmakers to recognize that the bill is “a starting point, and that there are important discussions going on. course on a comprehensive approach to tax policy and tax reductions”. as we move through the session.”
The Utah Taxpayers Association urges the legislature to go even further. The group issued a report last month, saying the state could cut the income tax rate to 4.5%, “even after taking into account healthy increases in spending on education and other priorities.”
Although the bill passed the committee by an overwhelming majority — 3-0 among senators and 10-2 among representatives — it has had its critics, some of whom have argued the cuts will have little impact on most families and said the money could be better spent on funding education and other programs.
Matthew Weinstein, director of the state priorities partnership with the advocacy group Voices for Utah Children, argued that most state employees are underpaid, leading to a shortage of teachers, bus drivers, prison staff and other workers. Rather than cut taxes, he told the committee he should focus on “the huge number of unmet needs” in the state.
“In particular, cutting the income tax rate is not a good return on investment for your … average middle-class family of four,” he said. “If you reduce the rate to 4.8%, they get about $50, but they are giving up more than double the investment in their children’s education for every child. The blow to education is more than $100 per child in lost investment, making it that much harder to keep up with our large class sizes (and) our nearly highest teacher attrition rate in the nation.”
Rep. Steve Eliason, R-Sandy, pushed back against Weinstein’s argument, noting that the budget surplus could cut taxes without cutting funding elsewhere.
Rep. Joel Briscoe, D-Salt Lake City, said any tax cuts should be more targeted to those who need the extra money the most, like those on fixed incomes or who qualify for credits. child tax.
“I’m not opposed to tax cuts,” Briscoe said. “I think, however, that we should focus on them and reducing income tax, for me, is not a priority. I think there are people who are more affected by the inflation now than the general population.… When we lower the income tax, we give significant tax relief to people at the top of the income pyramid, which is one of my concerns here. »
The committee also gave its recommendation to a proposed constitutional amendment which developers say would be a hedge against inflation, by allowing the legislature to increase the exemption homeowners can receive on their property taxes.
Under the current Utah Constitution, homeowners can have up to 45% of the fair market value of their residential properties exempt from property taxes. With the new amendment, the Legislature would be able to pass laws to exempt more than 45% of the value from taxes and prohibit the state or cities from taxing real estate purchases.
“One of the concerns we’ve heard from voters…is the unpredictability, or what we’ve recently seen in the trends of unpredictability in the rise in residential home values when it comes to the property tax,” said Sen. Dan McCay, R-Riverton. the committee.
Even if the bill passes the Legislative Assembly, it will need to be approved by a majority of voters in the next general election before it comes into effect.
Where does Utah’s budget surplus come from?
The state announced its latest financial summary last Tuesday, which showed Utah ended fiscal year 2022 with a $1.3 billion surplus. This is in addition to nearly $2 billion that had previously been set aside as reserves for the next fiscal year.
Heads of state said the surplus was the result of economic volatility and income tax payments associated with stock and property capital gains in 2021, and said they considered the surplus as an anomaly.
In a joint statement last week, Utah Governor Spencer Cox, Senate Speaker Stuart Adams and House Speaker Brad Wilson credited the “strong fiscal policy” and “spirit of ‘Business’ of Utah for additional income.
“Heads of State will exercise caution in spending these funds,” they said. “We remain committed to fiscal responsibility as we seek to fund projects that will serve our state now and for generations to come.”
The state will have $2.2 billion in the education fund next year, thanks to an 11% increase in income tax revenue in 2022. The state’s general fund will have by nearly $1.2 billion, after increased revenue from sales tax, federal mining leases, and oil, gas mine separation taxes.
State Finance Division Director Janica Gines said many of those increases — particularly for sales tax and oil and gas — are, in part, the result of continued inflation and high gasoline prices.