With the release last week of the Monthly State Revenue Snapshot and TC-23 from the Utah State Tax Commission it is abundantly clear that the right decision for Utah is cutting taxes for 2023 now – not more “above-trend” spending.
Continuing to blow past all expectations by a wide margin, tax revenue collections show that general fund/education funds stand at $9.88 billion after 10 months of the fiscal year. With 2 months remaining, even with just average historical collections, Utah will likely end fiscal year 2022 (June 30th) with a surplus somewhere between $700 million and $1 billion.
Even if economic headwinds turn into storm clouds, the deep wisdom of Utah’s Legislative leadership is already evident. Thanks to prudent management, Utah’s rainy day funds now stand at more than $1 billion. Along with that, paying cash for many projects recently allows legislators headroom to borrow for those projects if needed, freeing up even more cash. The Executive Appropriations Committee (EAC) even put a $250 million dollar hedge in place in the 2022 session by moving ongoing revenue to one-time. Utah is firmly positioned to weather an economic downturn.
While some will bemoan any call for more tax relief, for the sake of taxpayers, we must shine a light on recent government spending history to provide context.
From 2017 to 2022, Utah’s general fund and education fund spending has risen from $6.4 billion to $9.7 billion. That is an eye-popping 52% increase in just 5 years. During the 2021 session, an extra $834 million was spent on transportation. Just during the 2022 session, $1.5 billion in additional one-time spending and an additional $500 million in ongoing spending was added to the base budget. Over the last 3 years alone, $528 million was spent on shiny new buildings for Utah’s universities and technical colleges. K-12 education funding has also seen record breaking increases in funding in recent years. Of the over $6 billion in new spending over the past two legislative sessions, less than 5% has gone towards tax cuts.
As we know from recent federal spending, rampant growth in government spending only fuels higher inflation. Not only is slower growth in government spending the right long term policy, now is not the time for Utah to continue a spending splurge, further harming low-income residents most harmed by entrenched inflation.
While the cut from 4.95% to 4.85% was a good start, Utah’s efforts pale in comparison to other states’ recent actions. In contrast, one of the largest income tax cuts was enacted by our direct neighbor to the south- Arizona. Their legislature and Governor Ducey (R) enacted a cut to the tune of $1.9 billion (yes, you read that right, billion) that equates to almost 15% of their budget, reducing income tax rates from a recent 4.5% to a flat tax of just 2.5%.
It is time for the Utah Legislature to provide a meaningful income tax cut for Utah taxpayers. A cut to 4.50% is completely within reach. While still trailing neighboring states, it would be a solid step in the right direction. In the long-term it boosts growth, while in the short-term, it lessens the inflationary pressure. That would also leave plenty of revenue to fully fund education and other funding needs. Most importantly, it would benefit Utah for decades to come and return much of the excess revenue to where it belongs – in the hands of the taxpayers.