By the end of this week we may have a better idea how a proposed $225 million tax cut for Utahns will be split up between income and sales taxes, GOP legislative leaders tell UtahPolicy.com.
Republican Gov. Gary Herbert at first suggested a $200 million cut in his recommended budget in December.
Then in his opening remarks on the first day of the session, House Speaker Brad Wilson, R-Kaysville, said it should be a $225 million cut – which Herbert quickly agreed with.
But there is a difference between GOP legislative leaders and Herbert about where that tax cut should come.
Herbert wants it in the state sales tax – warning that income tax cuts naturally give bigger benefits to wealthier Utahns. And he wants low-income Utahns, who pay a larger percentage of their income in sales taxes, to get more of the benefit.
But Wednesday, Wilson told UtahPolicy.com that considering Herbert and lawmakers are working hard to reform the sales tax – broadening the base to include many services that are presently not taxed – then cutting the sales tax rate seems counterintuitive to what sales tax reform brings.
“Cutting the sales tax by more than $200 million doesn’t fix” that sales tax revenue inequity concern, said Wilson. “Unless there is something I’m not seeing.”
Rep. Tim Quinn, R-Heber, is leading discussions between the House and the Governor’s Office of Management and Budget – and by the end of the week, there should be some progress to report.
Besides the arguments over sales tax revenue keeping up with other taxes – making up the so-called three-legged tax stool, sales, income and property taxes – there are political considerations.
This is a non-election year, and so any tax cuts coming now may not be seen much in 2020 – when all the 75-member House and half of the 29-member Senate is up, along with an open governor’s seat contest.
Thus, cutting the sales tax – which Utahns pay every day when they purchase things – is less likely to be seen than a cut in personal income tax rate (now at 4.95 percent), which will be felt when residents pay their 2019 taxes in April 2020.
In an attempt to somewhat offset a state personal income tax revenue windfall because of the federal government’s 2017 GOP tax cuts, last session state lawmakers reduced the state personal income tax from 5 percent to 4.95 percent.
But that small reduction still may not make up the differences for some families, which could owe more Utah income tax due in April of this year because of the federal tax changes.
If GOP lawmakers can assuage some Utah taxpayers’ anger in a few months, with promised income tax cuts in a year, all the better politically for them.