Over the final days of the legislative session, a lot will be said, good and bad, about the legislature’s plan to decrease the income tax rate. At the time of publication, the rate is expected to drop from 4.55% to 4.50%, which for an average Utah family is a return of about $45.
Opponents to the change will say it only favors the rich, a result of Utah’s flat tax rate, and that the cut isn’t worth the result. Their argument, however, rings hollow for me. Those arguing for the rate to stay the same or increase are only masking their arguments in the real truth that they want more taxpayer money to spend on government programs and increase salaries for government employees.
My response to them is, if the legislature cannot find the nearly $100 million that this tax cut will cost the state in its $29 billion budget, then we have bigger problems in our state than making sure pet projects are funded and that salaries are fair to state employees.
So what are the benefits for the state by doing another small incremental cut to the income tax rate? First is we have to take a look at the whole picture for the state when it started cutting the rate from 5% in 2018 to 4.5% should this year’s bill pass. That totals in more than $1 billion in tax cuts in the last seven years. That is a significant amount that does make a difference to Utah families and businesses.
The incremental cuts also show the state has been thoughtful in the change over the years. While some states make major shifts in the tax rate, if they do not plan correctly they often find themselves back the next year making tax changes to account for the dramatic change and the unforeseen impacts the changes had.
Utah’s process has resulted in tax cuts that are truly permanent and meaningful for its residents. It has allowed the state government a chance to adjust to the change in a more easy process. The old saying of the best way to eat an elephant is one bite at a time is relevant here. The best way to cut a tax is to be careful and methodical so that you do not completely disrupt essential services but ensure efficiency in how taxpayer dollars are spent.
Another positive to dropping our income tax rate is the continued battle to keep Utah competitive with other states to attract businesses and jobs. One factor businesses consider when choosing where to expand is the tax climate they will face in a state. Because of this, states around the country are racing to drop their income tax rate to ensure they are looking the most attractive.
Last year, 14 states lowered their income tax rate. Of those 14 states, eight of them dropped their rate lower than Utah’s. When you look at the states surrounding us, Nevada and Wyoming have no income tax while Arizona and Colorado both have rates lower than ours even after this year’s pending change.
This is why both House Speaker Mike Shultz (R-Hooper) and Senate President Stuart Adams (R-Layton) have both set a goal to get Utah’s income tax rate below 4% before they end their terms in legislative leadership. They both should be applauded for this commitment. That impact will be felt for years as it will ensure Utahns have more money in their bank accounts and it puts Utah in a prime position to attract the top companies to the Beehive State.
We look forward to continuing our partnership with the legislature to accomplish this goal and keeping Utah competitive in attracting the best businesses to the state.