With the release of the latest revenue numbers from the Utah State Tax Commission, the recently completed fiscal year of 2022 is “in the books”. Even adjusting for small changes as numbers are finalized, one thing is abundantly clear – Utah is sitting on another massive surplus. A $1.4 billion surplus to be exact. Your Utah Taxpayers Association continues to urge Legislators to provide meaningful income tax relief for taxpayers. It is long overdue after massive increases in spending on education and transportation over the last several years. The very small tax cut during the 2021 legislative session was a good start, but as we have pointed out before, that effort was abysmally small.
The good news is that there is so much extra revenue, education and other needs can be fully funded AND a meaningful tax cut can both be provided. We would like to explain how.
Earlier this year, during a meeting of the Executive Appropriations Committee (EAC), a final estimate for the end of fiscal year 2022 was adopted. The consensus was that revenues would come in at $10.113 billion:
The good news is that, not only did Utah collect more than what was forecasted, collections topped even our optimistic forecast. Actual revenues came in at $11.548 billion:
This means that after the recently completed fiscal year (it ended on June 30th), the State is sitting on an extra $1.4 billion over and above all appropriated spending.
The news gets even better.
When the EAC met a few months ago, they went through the normal process of setting the consensus estimate for what revenues will come in for the next fiscal year, fiscal year 2023. A very conservative estimate was set at $9.721billion:
Economists are doing their job at predicting 27 of the last 3 recessions. We don’t fault them for that. However, what this means is that the Legislature has already baked in a drop in revenues from now until the end of June 2023 of -15.8% or -$1.826 billion. Each day that goes by where the sky does not fall as predicted, or Utah’s economy remains resilient, or if any recession is more mild than predicted, the current surplus will only continue to build.
In addition, the ongoing appropriations the Legislature has set, currently sit at approximately $9.343 billion. That means, even after factoring in all of the spending currently planned, there is at least a $1.778 billion cushion – even before the already booked surplus of $1.4 billion is considered.
So, the legislature has a decision to make: continue to spend, spend, spend and further drive inflationary pressures – or – give taxpayers a meaningful income tax cut while still providing very healthy increases to education and other spending.
In our view, the solution for the 2023 legislative session is simple – an income tax rate cut to 4.50%. That would take approximately ⅓ of the surplus, about $560 million, and return it to taxpayers pockets and insure Utah continues to lead the nation in good tax policy, while still leaving ⅔ of the surplus for building reserves and providing a healthy increase to education funding.