Republican legislative leaders announced a $400 million tax cut package on Thursday afternoon. The proposed cuts are skewed toward the state’s top-income earners, with modest reductions for Social Security recipients and lower-income Utahns thrown in for good measure.
The Legislature’s top budgeting committee committed $400 million in excess revenue for tax cuts late last year. They’ve been negotiating how those cuts will take shape behind closed doors for several weeks.
Legislative leaders previously said they were waiting for new revenue projections before deciding on the size and scope of any tax cut proposal. Those figures are due to be released to the public early next week.
The majority of that money goes toward dropping Utah’s income tax rate from 4.85% to 4.65%. The bill’s fiscal note was unavailable on Thursday afternoon, but another bill proposing an identical cut carries a $379.5 million yearly price tag.
Gov. Spencer Cox’s 2024 budget proposal recommended a cut to Utah’s income tax rate by 0.1%, half of what legislative leaders announced on Thursday. In that proposal, the governor’s office noted that low-income Utahns wouldn’t see much of a benefit from a cut in the income tax.
“Because many low-income households have their income tax liability erased by the Taxpayer Tax Credit, the benefits of reductions primarily go to upper-and middle-income households,” the proposal read.
“We firmly believe money is best used when left in the pockets of our citizens, and we’ve clearly demonstrated that the past few years,” said Speaker Brad Wilson in an email announcing the tax reduction package. “The Legislature is constantly looking at ways to reduce taxes while being fiscally responsible and good stewards of our resources. The best way we can ensure Utahns can continue calling Utah home is by passing family and business-friendly policies, including reducing taxes.”
In the news release announcing the cuts, House and Senate leaders noted the average Utah family of four earning $80,000 per year would see tax savings of $208 per year, or just over $17 per month. That’s double the income tax cut approved by lawmakers last year that gave those same families an extra $8 per month.
The remaining money for tax cuts, about $20 million, will go toward a trio of tax cut proposals.
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Utah is one of a handful of states that taxes Social Security benefits, but recipients who make under a certain amount can get that money refunded. The plan expands the number of recipients eligible for that refund by raising the income threshold to $75,000 annually.
Utah’s earned-income tax credit, which was established last year, increases from 15% of the federal EITC to 20%. A family with three children earning under $64,000 is eligible for a federal credit of up to $7,430 this year, reducing their state tax bill by just under $1,500.
The bill also incorporates a proposal from Rep. Karianne Lisonbee, R-Clearfield, that gives an income tax credit for unborn children.
The cuts are made possible by more than $2 billion in surplus revenue in this year’s budget, most of that coming from higher-than-forecasted income tax revenue. Utah’s Constitution specifies that income tax collections can only be put toward public and higher education and some social services. Cutting income taxes reduces future revenues for those purposes.