The 2022 General Session began just a few weeks ago, and we’ve been working with legislators, our members, and the public to identify tax issues that need to be addressed.

It’s impossible to guess what will happen over these 45 days, but the Association knows, as always,  its legislative priorities will make positive changes to Utah and its taxpayers. Here are some of the policy changes we’ve been working on.

Decreasing Utah’s Income Tax Rate and Proposals to Help Lower-Income Utahns

An income tax cut is already a major focus of the upcoming legislative session, and we’re only a few weeks in. 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, $219 million of new ongoing revenue is still available after set asides, and the February (out in a few weeks) revenue updates should provide even more room for a meaningful cut.

One bill, Senate Bill 59, which lowers the income tax rate from 4.95% to 4.85%,  has already passed the Senate. It awaits work in the House. While this is a good start, we believe the Legislature has a great opportunity to provide an even greater reduction in the income tax rate.

While this works its way through the Legislature, there are several proposals that could be added into this version of the tax cut bill.

One proposal is to enact an earned income tax credit for low-income individuals. In addition, legislative leaders are also discussing increasing the income threshold to qualify for the social security income tax credit. Rep. Walt Brooks has a bill that would increase the threshold for those married and filing jointly from $50,000 to $62,000. At this point, it is unclear whether either of these proposals will be added to the rate reduction legislation.

Your Taxpayers Association will continue to urge the legislature to provide a substantial and meaningful income tax cut for all of Utah’s taxpayers, while still maintaining full funding for public education.

As Property Values Rise, Providing Relief for Senior Citizens

As an Association, we hear regularly 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 considering SB 25 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 operation.

The bill was defeated in 2021, but following months of negotiations with interested parties, an agreement has been made. SB 25 has already passed the Senate and is expected to pass the House.

Maintaining the Statewide Sales Tax on Food

There are two drafted pieces of legislation that would eliminate the state portion of the sales tax on food. Your Taxpayers Association has always been opposed to proposals to lessen or eliminate this tax.

Whenever the debate surrounding the sales tax on food reignites, hyperbole and emotion sometimes get in the way of facts.

Tax revenue stability matters. The most common phrase in good tax policy is: broaden the base and lower the rate. A broad base means as many items or people paying taxes provides a larger or “broader” tax base. This means that a lower rate is needed to generate the same amount of revenue. Essentially, the more people chipping “into the pot”, the less each person needs to pay. 

Utah experienced an economic downturn throughout 2020 and into 2021. Sales tax revenue has been solid as purchases remained steady even during lockdowns. This helps the government provide essential services in economic downturns to those that need it the most. 

While this is an unpopular opinion, we strongly believe that eliminating or reducing the tax on unprepared food is poor tax policy and would lead to tax increases in the very near future.

Protecting Taxpayers Following Action on Taxes on the Federal Level

Following action on taxes at the federal level in 2017, the state automatically began collecting more revenue from Utah taxpayers due to the loss of dependent exemptions. This money was automatically appropriated and spent through the budgeting process.

This was money that the state never took action on or intended to collect, but due to federal changes, collected anyway.

SB 135, proposed by Sen. Dan McCay, would create a restricted account that would save the money following any new federal tax action that resulted in increased revenue for the state. This money would then be used by the Legislature for any purpose they choose, transparently deciding whether to spend the money or return it to the taxpayers.

SB 135 creates transparency for Utah taxpayers, and provides the opportunity to return money that the Legislature never intended on collecting back to Utahns.

Eliminating Sales Taxes on Business Inputs – Oil and Gas Extraction

Utah’s past legislatures have made a concerted effort for over three decades to remove sales taxes from business inputs, or what is required by a business to make a final product.

However, Utah still imposes punitive sales taxes on oil & gas exploration and production and non-renewable electric generation. Unfortunately, this has had an adverse economic 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 in order to eliminate tax pyramiding. It also drives economic development and tax revenue for the state. For example, passage of the 1995 manufacturing sales tax exemption ensured 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 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 HB 156  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 Equitably 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 is running HB 186, which provides two different tracks to address this problem. First, it slowly steps up the registration fees EV’s pay in lieu of the gas tax over the next 10 years with increases in 2023, 2026 and 2032 when they become larger percentages of the fleet in Utah. Second, it lowers the cents per mile charge RUC (Road Usage Charge) users pay to 1.0 cents until 2026 when it will go to 1.25 cents and then in 2032 it will be 1.5 cents. This will provide more financial motivation for folks to enroll in the RUC program since they can possibly pay less than the annual fee with more mileage allowed. 

The Taxpayers Association will be strongly advocating for this important bill to pass as Utah stats to address long term transportation issues. 

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 completed  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. 

Rep Robertson is running HB 237 to address this issue. With some changes, HB 237 is expected to pass the Legislature this year. 

To view all the legislation your Taxpayers Association is engaged in, see the Watchlist on our front page.