Through the past 8-10 months Utah’s tax collections have continued to surprise on the upside. The last stimulus sent to individuals was almost a year ago at this point, yet sales tax revenue and income tax revenue is still clocking in at eye-popping levels. As the shackles of the COVID pandemic continue to fall away and society is allowed to resume normal life, Utah’s robust economy will continue to produce growth in state tax revenues.
Case in point- the recent TC-23 report released by the Utah State Tax Commission. The Tax Commission’s January 2022 TC-23 makes for an even stronger case for a long-term investment in Utah taxpayers.
All three of the largest revenue sources are above target – and by a lot. Sales tax is up 20.8%, well-above the December estimate of 9.2%. The corporate tax is also healthy, up 27.0% compared to a theoretical target of -13.0%. The income tax is also strong, up 19.3% after adjusting for the timing of prior year tax payments.
If these growth rates were to hold against the most recent, updated forecast, the pending February revenue forecast could include at least an additional $500 million to more than $1 billion in new available ongoing revenue. As this table shows, it could be far more than $1 billion, however, a prudent forecast with some slowing baked in is probably best.
What does this suggest? There’s more than enough money for an income tax rate far better than the 4.85% that is currently proposed.
Last session, policymakers opted to hedge the revenue forecast by $400 million. The new 2022 forecast is $1 billion above the original forecast. When the new 2023 forecast is done in February, the recent hedge of $250 million adopted during the December 2021 meeting of the Executive Appropriations Committee should be reviewed as well.
Bottom line: The world is not falling apart. The future is bright. Policymakers have hedged their risk, and then some. The time for withholding significant relief for taxpayers is over. The TC-23 confirms that a rate of 4.5% to 4.65% is more than just achievable, it’s prudent.
I strongly urge taxpayers to join us and advocate for this meaningful relief for taxpayers and invest in the long term future of Utah.