GOP legislators are looking at giving taxpayers and corporations a $20 million tax cut next year.
Facing more than a half-billion dollars in revenue growth, many lawmakers feel strongly a modest tax cut is the least that should go back to the folks who pay it.
Yes, it’s budget crunch time in the Utah Legislature.
Look for these things to get sorted out within the next 36 hours – with most of the decisions being made behind the scenes:
- A personal income tax cut for Utahns, maybe small - from 5 percent to 4.95 percent -but still...
- Property tax reform that will firm up education funding for years to come. This likely will result in some tax hikes in some areas of the state down the road. The current proposal freezes property taxes. The change would be revenue-neutral this year but theoretically would boost public school funding in the future as property values rise.
- Tax relief for some businesses, coming in the form of adopting a “single sales factor” for corporate income taxes, which would be a big tax break for companies that sell a lot of their product out of state.
The single sales factor is a significant change. Instead of calculating the tax based on payroll, property, and sales, corporate property taxes would depend solely on how much economic activity a company has in a state.
Under the current three-factor system, corporate income taxes are based on how much of their property, payroll, and sales happen in Utah. For example, if a company has 50% of their property and 50% of their payroll in Utah, but only 1% of their sales, then the tax bill would be calculated on 34% of their profits. Using the single-factor system, a similar scenario means Utah would only be able to tax 1% of the company's profits.
Currently, Utah uses single-factor on some businesses, but not all of them. Proponents of the move say the lower taxes would be a boon for business recruitment in Utah, helping to boost Utah's economy.
- Another piece of the sales tax puzzle is SB145 from Sen. Lincoln Fillmore, R-South Jordan. That bill moves state tax money to poorer school districts to equalize funding with the more wealthy areas of the state. That bill currently sits in the Senate waiting for a final debate.
- Lawmakers also say they're hoping to boost the WPU, the basic unit of school funding, by at least 4% next year. That would provide $132 million in new funding for schools in 2018.
- Allocations of more than $580 million in current and expected tax surpluses into various state programs, including a big chunk of money for the rainy day fund.
- A cost of living pay increase for state employees. Additionally, lawmakers are discussing setting aside a pool of money for targeted pay raises to attract and retain employees in critical areas.
House Republicans were kept in a long, closed caucus Tuesday afternoon – missing some floor time – so that they could find the 38 votes, a majority in the whole House for the tax cut package.
“We did get to 38,” said House Majority Leader Brad Wilson, R-Kaysville.
House Speaker Greg Hughes, R-Draper, tells UtahPolicy.com that his caucus is not yet at the $20 million tax cut level.
He likes that number, “If I can get there” with his members.
“We are still baking the cake. Can’t show it to you yet,” said Hughes, who has announced he’s retiring from the House. But he could be looking at the 2020 governor’s race, and it is an election year for all of his House members – so a tax cut would be a good political move.
Sources within the House GOP caucus tell UtahPolicy.com that Republicans are in favor of the tax cut plan in principle, but are still working to find a consensus on some of the issues.
Wednesday and Thursday, House leaders, working with GOP senators, will come together to make some critical choices as they work toward the final budget.
Republican Senators say they are ahead of the House on many of these issues, including a list of their funding priorities.
But that is to be expected – there are only 24 GOP senators, while there are 62 House Republicans, several in swing districts where they could have real battles with Democrats in November.