We’re just a few weeks away from the 2022 Legislative Session, and your Taxpayers Association has been very hard at work for months. We’ve been working with legislators, our members, and the public to identify tax issues that need solving.
It’s impossible to guess what will happen over those 45 days, but the Association knows its legislative priorities will make positive changes to Utah and its taxpayers. Here are some of the policy changes we’ve been working on.
Providing Meaningful Tax Relief to All Utahns
An income tax cut should be a major focus of the upcoming legislative session. With the large amount of surplus revenue the state of Utah is seeing (more than $1.2 billion in new available ongoing revenue and more than $1.5 billion in new available one-time revenue) the Executive Appropriations Committee has already set aside $160 million for tax cuts.
While that is a good starting point, with $219 million of new ongoing revenue still available after set asides and as the February revenue updates should provide even more room for a cut.
Several bills have already been filed to lower Utah’s income tax rate to 4.95%, 4.75%, or 4.6%.
Your Taxpayers Association will continue to urge the legislature to provide a substantial and meaningful income tax cut for Utah’s taxpayers.
Helping Seniors Most in Need As Their Property Values Rise
We’ve heard from many seniors who are concerned about losing their homes as their values and property taxes increase. In some circumstances, they are being taxed out of their homes.
The Legislature is expected to consider a bill that was before it in 2021 that will help address this issue. The legislation would allow eligible homeowners to defer, or hold off paying property taxes until a title transfer.
At that point, the taxes would be due with interest. All taxing entities, under a deferral, are held harmless and would still be able to collect the revenue.
In addition, there would be a $10 million set aside to keep governmental entities harmless while the program begins operating.
The bill was defeated in 2021, but following months of negotiations with interested parties, an agreement has been made. It is expected to pass this year.
Eliminating Sales Taxes on Business Inputs – Oil, Gas, and Electrical Generation
Utah’s past legislatures have made a concerted effort for over two decades to remove sales taxes on business inputs, or what is required by a business to make a final product.
Your Taxpayers Association has strongly supported the use of sales tax exemptions in order to avoid tax pyramiding, which has helped establish Utah as the state with the best economic outlook for 13 years running, according to ALEC’s Rich States Poor States annual ranking.
However, Utah still imposes punitive sales taxes on oil & gas exploration and production and non-renewable electric generation. Unfortunately, this has had an adverse effect on the eastern part of the state, most prominently the Uintah Basin counties of Duchesne and Uintah.
Utah has a history of eliminating sales taxes on business inputs. For example, passage of the 1995 manufacturing sales tax exemption ensured the Micron’s initial investment of more than $1 billion in Lehi. The “three-year-life” manufacturing exemption legislation in 2018 ensures that Utah manufacturers continue to provide jobs for Utah families.
Unfortunately, the oil and gas operations in the Uintah Basin and other oil and gas counties such as San Juan continue to pay punitive sales taxes on all of their machinery and materials consumed in the process. This sales tax combined with a hefty severance tax makes capital investment less attractive and leaves the region victim to ongoing boom and bust cycles.
The Association is strongly supportive of upcoming legislation that will fix this issue and lead to stable, strong growth and economic prosperity for those areas in Utah that desperately need attention.
Ending the Subsidization of Electric Vehicles by Funding Roads More Equitable through the Road Usage Charge Program
Once again this year, legislators will seek to make sure all road users pay their fair share for road usage. While gas vehicle drivers pay an average of $380 per year in gas tax, electric vehicle drivers only pay $120 per year in additional registration fees for road usage. Bringing parity to that equation should be a goal of the legislature as EV’s become a larger part of the fleet over the next decade. This is necessary in order to avoid a road funding crisis as the gas tax.
Representative Ray Ward will be running a bill to address this issue, but expect changes to the legislation as it moves through the process.
Ensuring Taxpayers Have the Information They Need When Facing a Property Tax Increase
During budgeting and the Truth-in-Taxation process, the Taxpayers Association discovered that some taxing entities had been using a loophole in state law to avoid providing their taxpayers with the transparency required under Utah’s Truth-in-Taxation law.
Under Utah law, taxing entities are required to publicly provide an adopted budget each year. This is especially important when the entity is considering a tax increase. Taxpayers absolutely must have all the necessary information and deserve to know what a proposed tax increase is being used for.
In this specific circumstance, a taxing entity, which serves 1.5 million people in Utah, proposed a tax increase, but argued that they were not required to post their budget online because the tentative budget hadn’t been “officially” adopted. They argued the official adoption is done in August, during the Truth-in-Taxation meeting. By that time, it is too late for taxpayers to understand what is in the budget and to determine whether the proposed increase is valid. This is a very clear case of obeying the letter of the law, but not the spirit.
Personal Property Tax Exemption Timeline
With the passage of SB 18 (Harper) during the 2021 session, Utah’s small businesses were given more relief from the Personal Property Tax as the exemption for the tax was raised from $15,000 to $25,000.
That eliminates more than 39,000 Utah businesses from having to deal with this burdensome tax. However, taxpayers must wait 5 years to not have to file that tax return even though they might owe $0. Representative Spendlove is running a bill to shorten that timeline to one year. That will bring more sensible relief to Utah’s small businesses.
Clarifying and Simplifying Taxes on Businesses
Senator Dan McCay is running a bill to continue to make Utah one of the best states in the nation to do business. His bill to allow for a business income election on certain capital gains will provide a better tax landscape for Utah based businesses. Along with Utah’s adoption of single sales factor apportionment for corporate income tax a few years ago, this bill will help retain and attract jobs for Utah’s families.