During legislative interim meetings at the Capitol in October, your Utah Taxpayers Association presented the case for a sustainable income tax cut to the Revenue and Taxation Interim Committee

As our annual Beehive Family Report shows, state income tax is the 2nd highest state tax burden that the typical Utah family faces each year, second only to property tax. Conversations around lowering the income tax rate are extremely important to Utah families since it would provide meaningful relief. 

Based on our analysis of the TC-23 reports (revenue summary and fiscal year comparison report) released by the Utah State Tax Commission, we calculate that Utah will be looking at new available ongoing revenue of over $1.5 Billion once the final calculations are done for fiscal year 2021. That should be in addition to new available one time revenue of over $1 Billion. That is new revenue over and above what the previous year spending levels were.

There is more than enough revenue to fully fund education, meet other spending needs and provide a meaningful tax cut for Utah taxpayers. Cutting the income tax rate from the current 4.95% to 4.50% would be a $585 million tax cut and leave over $900 million in available ongoing revenue for other spending needs as well as $1 billion in new available one time revenue.

Policymakers need to realize that this would be a very reasonably sized cut in relation to the tax revenue base. A cut of this size would be much smaller than the last meaningful tax cut done in 2007, when the tax rate was lowered to the 5% flat rate. That was about 8% of the tax base at the time. A cut to 4.50% this year would only equate to approximately 5.85% of the current tax base.

As your Utah Taxpayers Association knows, lower tax rates increase revenues over time, and that has certainly been the case in the decade that followed the income tax cut done in 2007. Since 2007, income tax revenues in Utah have ballooned by approximately 126% through fiscal year 2021, going from $3 billion to over $6.8 billion. That is $3.8 billion in new revenue that has flowed to state coffers and allowed the legislature to massively increase spending on education and other priorities.

While the Legislature gets little credit for robust increases in education spending, it is important to examine the data that provide context to the needs of education in Utah. While enrollment growth in K-12 education has slowed over the last dozen years, dropping from about 2.5% growth per year to approximately 1% per year, increases to education funding by the Legislature has gone in the opposite direction. Funding increases over the last 6 years from fiscal year 2017 to 2022, for example, have been 7.0%, 6.5%, 5.8%, 4.6%, 8.2% and 3.5%. Education spending has been robust and a reasonable increase can be given even in addition to a reasonable income tax cut given the revenue picture that Utah is looking at.

As revenue calculations are finalized in the coming months, your Utah Taxpayers Association will be strongly advocating for an income tax cut from the current 4.95% to 4.50%. It is not only the best policy for Utah in the long run, returning the excessive revenue to the taxpayers of Utah is the right thing to do.