Utah is among a minority of states that tax Social Security benefits, and at least one lawmaker thinks it’s time to rethink that.
Sen. Todd Weiler says he intends to pursue legislation that would grant a state income tax exemption — at least for low-income retired residents.
Weiler, R-Woods Cross, said he was unaware of the policy until an elderly person in his district brought it to his attention, "basically asking me to explain why Utah hated old people, if you will," Weiler told the Legislature’s Revenue and Taxation Interim Committee on Wednesday.
"He went on to elaborate that Utah is one of the few states that tax Social Security benefits," Weiler said, "and he felt that was unfair and unjust and I promised that I would look into the issue."
What he found surprised him: 37 states completely exempt Social Security income from state tax (nine of those have no state income tax), according to legislative researchers.
"Many of us pride ourselves on the fact that we’re a conservative state, that we’re a low-tax-burden and not overly regulated state," Weiler said, "and I was surprised that we’re kind of an outlier when it comes to taxation of Social Security benefits."
Utah does grant a modest tax credit for retired people — but only those born before 1953 are eligible.
Thomas Young, of the Legislature’s fiscal analyst’s office, calculated that exempting Social Security from income tax would cost the state $63 million annually, based on an estimated 89,500 affected taxpayers.
"Obviously," said Weiler, "the state cannot afford a $63 million fiscal note, especially since that would come primarily out of our education fund."
But Weiler said in an interview after the presentation that he intends to draft a bill that would grant an exemption to about 100 Utahns whose Social Security checks make up 75 percent or more of their retirement income, at a cost to the state of $40,000. Or he might attempt to extend it to some 3,500 Utahns whose Social Security payments comprise 50 percent or more of their income, at a cost of $1.6 million.
"That," he said, "would protect some of our most poor and financially challenged people."
The panel didn’t vote on the concept, but could take a position in the next few months when Weiler returns with a draft bill.
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