December 9, 2019 – The Utah Taxpayers Association urges lawmakers to vote YES on the tax reform legislation that was released on Friday, December 6th. This important piece of legislation will be a key part of our legislative scorecard in the coming year.
The refinement that has taken place over the last nine months has produced legislation that will deliver a significant tax cut to taxpayers and ensure that Utah maintains and improves its position as the best state in the nation in which to live and do business.
The Utah Taxpayers Association has been involved in a countless number of meetings over the last year on this subject with many of you and have witnessed thorough and careful legislative consideration of feedback and recommendations that we and others have provided. We know you want to get this right.
There has been much misinformation and misunderstanding in the public debate and we would like to make a few things clear.
First, this bill is a significant tax cut to Utah taxpayers. It delivers a $344 million income tax cut through the implementation of a lower income tax rate that will go into effect almost immediately.
Second, it gives back $132 million to taxpayers who were hurt (yes – hurt) by Utah’s link to federal tax reform in 2017 with caused the unintentional elimination of personal exemptions. This bill is correcting the very problem that many families experienced when they saw their state income taxes increase in 2018. The Legislature should be commended for this overdue correction.
Third, it slashes $18 million in taxes on social security for senior citizens. For many low income senior citizens, it could entirely eliminate the state income tax on their social security income.
Fourth, in regards to the sales tax on food, a key fact is being left out of the conversation. Once the tax withholding tables have been changed to reflect the income tax rate cut and the higher personal exemption amount, taxpayers will see a reduction in taxes taken out of their paychecks. This is essentially a pay raise for Utahns which would far outweigh the increase in sales tax they will pay on groceries.
That is before we even mention the newly created refundable grocery tax credit, which is an additional $135 million tax cut handed directly back to low and middle income taxpayers. That alone will put an additional $500 ($125 per person) in the pocket of a family of four. That family of four would need to spend more than $1,200 per month on groceries before even coming close to equaling that credit with the additional sales tax they would pay on food.
Fifth, this bill starts the process of correcting the major problem we have in transportation. Currently, gas tax revenue only provides less than half of what is needed to maintain and build roads. More than $600 million per year is taken from sales tax revenue to plug that hole. That cannot continue. It is only fair to have road users pay for their usage of the roads. Although the taxes on fuel will likely only be a reliable revenue source in the medium term, the rise of electric vehicles, and more efficient gas-powered vehicles creates a problem. The best “user fee” for transportation that we have currently is moving to a road usage charge (RUC). We would hope that this model eventually becomes the primary funding source for transportation.
Taken as a whole, the bill deserves support, however, we have issues with two remaining parts of the bill. Specifically, sales tax will be charged on electricity to ski lifts which is clearly a business input and constitutes pyramiding. In addition, the bill raises the State Motor Vehicle Rental tax from 2.5% to 4%, bringing the total state and local tax a car rental customer will pay upwards of 19%.
All of the tax cuts in the bill add up to a total cut of nearly two-thirds of a billion dollars at $635 million. That not only offsets the additional $475 million in taxes on fuel, groceries and some services that may be collected under the bill, but goes even further and delivers a net tax cut of $160 million dollars. That fact needs to be restated and made clear. This bill is a significant tax cut for the people of Utah. It is no secret that we were strongly opposed to the original tax reform bill, House Bill 441. However, the refining process over the past nine months has been long, deliberate and thoughtful. Utah now has a solid tax reform solution for which we strongly urge you to vote YES.