Lawmakers have largely abandoned plans for any sort of large-scale tax relief this year, opting to set money aside in case the economy sours.
Legislative sources tell UtahPolicy.com that Republican leaders in the House and Senate are haggling over removing taxes on Social Security income up to $50,000 annually, which would carry an estimated $16 million price tag. House leaders are pushing for the tax break for seniors while the Senate wants to put as much money aside as they can in case of an economic downturn.
“We’d like to help the seniors out there if we can,” said one member of the House leadership team. “Putting $16 million in the pockets of seniors is a bigger deal than any money we could put aside.”
Financial markets cratered on Monday morning. The New York Stock Exchange was forced to suspend trading briefly as the market drop triggered an automatic "circuit breaker" to stop a slide in trading. The Dow fell more than 2,000 points and oil prices tumbled into the $30 range.
Last year, lawmakers put $80 million aside for tax cuts as part of the tax reform process. That money was not spent after the tax overhaul was repealed in January. Legislative leaders have been targeting some kind of tax cut this year, especially with more than $500 million in extra income tax collection.
But, in the past 2 weeks, market instability and fears over the coronavirus have put a damper on those plans.
“We’d like to set that money aside,” said Sen. Jerry Stevenson, R-Layton, speaking of the $80 million from last year. “I think it may give us something to work with if we have to come back here in a few months.”
Stevenson points out that the hundreds of millions of dollars of projected extra revenue lawmakers have been spending could fail to materialize if the economy sours this year.
“We have to remember this money we’re spending is not money we have in hand. We anticipate what the budget will look like, so we may need that money to come in and fix some of those shortfall spots if things change,” he said.
Lawmakers have been discussing a number of potential tax relief measures this session, including dropping the overall income tax rate from the current 4.95 percent to 4.9 or even 4.89, giving a one-time tax rebate or even a tax cut for members of the military. All of those plans have gone by the wayside as legislators feel it’s more prudent to put cash aside instead of spending it this year.
“This shows the wisdom of setting some money aside. I can’t predict what this will look like if this is a short-term issue, but I feel really good about the steps we’ve taken to prepare as a state,” said House Speaker Brad Wilson, R-Kaysville.
“The tax cuts we’re talking about are pretty minuscule when you look at the overall budget,” said Senate Majority Whip Dan Hemmert, R-Orem.
While lawmakers have decided to keep just over $60 million in the bank, it’s not clear how much of an impact that money would have if they have to come back and fix the budget later this year because of a shortfall.
“When you have to walk in and tell the departments they’ve got to cut 5 percent or 10 percent, that’s the tough part,” said Stevenson. “We could use that cash to shore up areas of the budget that might fall short if we have to.”