A bill that would lower the state income tax rate for residents and corporations passed the Senate Revenue and Taxation Committee on Wednesday on a 6-2 vote.
The proposed legislation, SB59, introduced by Senate Majority Leader Evan Vickers, R-Cedar City, originally sought to reduce the state income tax rate from 4.95% to 4.9%. This substitute bill, now sponsored by Sen. Daniel McCay, R-Riverton, reduces the income tax rate to 4.85%.
“Our rainy day funds are nearly full, and we’re in a position now where we can take some of that money and return it to the taxpayers,” McCay said, referring to the budget surplus the state is projecting.
The bill would result in an ongoing $163.7 million in tax relief. Under the bill, McCay said a family of four, earning an annual income of $72,000 a year, would receive a tax cut of about $100 each year.
“It’s not a big number, but it does make a difference to those who earn that income,” McCay said.
Sen. Luz Escamilla, D-Salt Lake City, who voted against the bill moving forward, said she would rather focus on spending the proposed $160 million by contributing to education, child care and social services. Escamilla added that eliminating sales tax on food would be more impactful for Utahns in need.
During the public comment portion of the meeting, Rusty Cannon, president of the Utah Taxpayers Association, said after property taxes, the second-highest tax burden Utah families face is state income tax and called for a larger tax cut than what is being proposed now.
“Families right now are facing stiff inflation,” he said. “There should be ... a lot of room to make this even more significant for taxpayers with a deeper income tax cut.”
Matthew Weinstein, fiscal policy director for the advocacy group, Voices of Utah Children, suggested that lawmakers use caution when approaching the proposed income tax cut and urged for an Earned Income Tax Credit.
“Solving Utah’s labor shortage would be helped by an Earned Income Tax Credit, which not just helps reduce poverty through people’s own work effort, it also brings workers into the economy and helps the economy in that way,” he said.
Any income tax cut reduces the amount of revenue the state has to fund public and higher education since those funds are constitutionally designated for that purpose. Lawmakers say any reduction in revenue will be replaced with future economic growth.
“You have to use a balanced approach that keeps your economy growing, and therefore your income tax is increasing over time. This is a balancing act. There’s never just one way to do this,” Senate Majority Whip Ann Millner, R-Ogden, told reporters this week.
There is the possibility the tax cut could be larger, but inflationary worries may put a damper on that, said Senate President Stuart Adams, R-Layton.
“It might be a little higher in some areas, but we’ll have to see,” Adams added.
Tribune reporter Bryan Schott contributed to this story.