AARP Utah has been actively following the Utah Legislature’s tax reform hearings and proposed legislation, and we believe that the bill contains a number of constructive provisions to support.
What is crucial for any tax plan is that it seeks reliable sources of funding, and so we support taxing additional services, as this tracks an important shift in consumer buying patterns. This change will broaden our tax base, help keep our tax rate low, and reflect where our state economy is headed—toward greater consumption of services versus products—therefore modernizing our current tax structure. As services continue to expand as a share of Utah’s economy, they cannot be ignored as an important source of needed revenue. Moreover, taxing services helps to reduce the regressive nature of the sales tax, as those with higher incomes typically purchase more services than goods. The same can be said for some of the sales tax exemptions the proposal eliminates, such as electricity used by ski resorts for chairlifts.
AARP also believes that when states are experiencing surpluses that allow them to cut taxes—as is the case in Utah—they should enact Earned Income Tax Credits (EITC) so that workers with low and moderate incomes and their families can also share in the tax benefits of prosperity. We strongly support the EITC to help lower income families rise out of poverty and stabilize their standard of living.
Similarly, the inclusion of a grocery tax credit is essential for helping Utah’s low-income families offset the proposed increase in the tax on food. This will reduce regressivity and directly target the assistance to those Utahns who need it most. We also appreciate that efforts are being made to ensure that lower income households receive this credit even if they don’t file a tax return.
Helping older people to retire with financial security is also a major priority for us, and so we have strongly advocated for removing the tax on Social Security benefits. Utah is one of only 13 states that still tax these benefits. Currently in Utah, lower income retirees receive a small tax credit each year for the Social Security taxes they pay, but this credit will be phased out for future retirees.
This is of considerable concern, as Social Security is a lifeline for many Utahns; the average benefit in Utah is about $1500 a month, and almost 20% of Utah’s Social Security recipients rely on Social Security for 90% or more of their income. Therefore, we are very encouraged that the tax proposal continues to provide the Social Security tax credit to lower-income recipients. In the future, we hope to work with policymakers to expand the credit to protect the retirement security of Utah’s middle-income retirees as well.
To gauge how Utahns feel about tax reform, we conducted a survey of Utah voters 18+ earlier this year, and found overwhelming support for funding of social programs, including healthcare services for children and low-income adults, homecare services for the disabled and elderly, and public education. AARP Utah, like our survey respondents, wants to ensure there is adequate revenue in the future for critical programs, particularly for those most vulnerable in the state. Therefore, we support a tax structure that would have this goal in mind.
AARP Utah recognizes that tax reform can be complicated and controversial. We appreciate the opportunity to provide comments throughout the task force hearing process. This proposal can be a first step toward changing our state’s tax system to fit into the modern economy so that Utah can continue to be a great place to live. We look forward to working with the legislature toward this goal.