House and Senate Republicans have hit an impasse over whether to give a tax cut to senior citizens now, or to wait in case of an economic downturn.
House Republicans would like to remove income taxes on social security income up to 48,000 per year before lawmakers go home on Thursday night. The proposal carries an estimated $15 million price tag. Senate Republicans say they agree with the idea but would like to wait and see if the economy recovers before they spend that money.
“Every day up here we look out the window and see things getting worse and worse,” said Senate Majority Leader Evan Vickers, R-Cedar City. “We would very much like to provide tax relief, but we have to make sure it’s a prudent move.”
The House passed HB181, sponsored by Rep. Walt Brooks, R-St. George, Monday night with overwhelming support on a 67-2 vote. It remains to be seen whether there’s enough support in the Senate to push the measure through.
Lawmakers have enough money set aside to pay for the modest tax relief proposal. Last year they held back $80 million in ongoing money from the Education Fund to pay for a tax cut as part of the failed tax overhaul.
The fiscal note on Brooks’ bill estimates it would provide about $250 in tax savings this year for more than 58,000 elderly Utahns.
Tuesday morning, several House Republicans told UtahPolicy.com that there are several good arguments to giving the tax cut now, including that Utah seniors will soon face the coronavirus, and be at more risk of getting a serious infection because of it. And it would be good, and humane, to give that group a healthy tax cut now.
Senators, on the other hand, argue and it would be prudent to take some time over the next few months to see how the virus affects Utah’s economy and tax collections.
What is clear is that if the tax cut on Social Security payments — up to $48,000 in income — is given now, it must be permanent. It can’t be taken away, even if Utah’s tax revenue drops off severely because of an economic downturn, whether associated with the virus’ effects or not.
Legislative leaders are quick to push back on any attempt to characterize this as a showdown between the House and Senate over tax cuts.
“We all agree on the policy,” said one Republican legislator who asked to remain anonymous. “We’d love to give as many tax cuts as we can. We just disagree on the best time to do them.”
“Our budget for next year is based on a projected 4 percent increase in sales taxes and a 6 percent increase in income tax collections,” said Vickers. “We want to make sure that money will be there before we pull the trigger on this. We don’t want to spend money we don’t have.”
Lawmakers are working with hundreds of millions of dollars of projected surplus revenues this year, most of those coming from income taxes. If the economy turns, there’s a worry that they may have to use the $80 million they set aside to shore up areas of the budget that may fall short in a downturn