After approving nearly $200 million in tax reductions earlier this year, Utah legislative leaders are itching for another round of tax cuts during the 2023 legislative session. State coffers are once again flush with cash and lawmakers have already started outlining the cuts they’d make come January.
“I predict the 2023 legislative session will be another year of the tax cut,” Utah Senate President Stuart Adams, R-Layton, said last week.
According to new budget numbers announced on Tuesday afternoon, Utah has nearly $1.4 billion in extra revenue heading into the 2023 lawmaking session. Most of that extra cash, approximately $1.235 billion, comes from income taxes, which the Utah Constitution specifies can only fund public and higher education and some social services. The rest of the extra cash, $130 million, is in Utah’s General Fund, which pays for everything else.
Just how big of a tax cut are lawmakers eyeing? On Wednesday morning, the Revenue and Taxation Interim Committee will consider draft legislation that would drop Utah’s income tax rate from 4.85% to 4.8%.
This year, the tax rate dropped from 4.95% to 4.85%. That one-tenth of one percent reduction translated to about $8 extra dollars a month for the typical Utah family making $72,000 a year. A drop of half as much as last year’s cut probably will have a similarly minimal impact on the average Utahn.
The difficult reality for lawmakers is any income tax cut is paid out of money that could go toward Utah’s schools. The funding lawmakers diverted for last year’s income tax cut could have boosted the per-pupil funding in Utah’s public schools by an additional 5 percent. Nationally, Utah is near the bottom of all 50 states for per-pupil funding, according to the U.S. Census Bureau.
Last year, lawmakers renamed the account they use to pay for education from the “Education Fund” to the “Income Tax Fund.” State Sen. Jerry Stevenson, R-Layton, explained at the time that the new moniker better reflects where the money in that particular pot comes from, not its use.
In addition to a possible income tax cut, there will likely be another attempt to eliminate Utah’s 1.75% sales tax on groceries. Last year, state Rep. Judy Weeks-Rohner, R-West Valley City, and Rep. Rosemary Lesser, D-Ogden, teamed up on a proposal to do just that, but their bill died without so much as a committee hearing. The money to eliminate the sales tax on food comes out of the General Fund, which has a smaller surplus.
Because of the massive budget surpluses, lawmakers say they can cut taxes and boost public education funding in the state, too. Any enrollment growth and increased costs because of inflation are automatically paid for by law. Legislative leaders say they’re considering funding increases beyond those, which may include raising salaries for teachers above and beyond the statutory requirements.
“We feel very strongly in doing everything we can to support public education. We all feel one of our top priorities is helping our teachers,” Utah House Majority Whip Jefferson Moss, R-Saratoga Springs, said during a press availability last week.
In addition to the extra cash for budgeting, nearly $70 million was automatically deposited into the state’s rainy day funds.