Utah lawmakers are well positioned to approve a nearly $200 million tax cut this year, in addition to the $160 million general income tax rate cut already approved by the Utah Senate.
The income tax rate cut bill, SB59, now includes two more items that House Republicans pushed as part of a tax relief package, including something that the Utah has never had before: A non-refundable earned income tax credit, which would be targeted to low- and moderate-income Utah workers.
The House Revenue and Taxation Committee voted unanimously on Friday to approve the new version of SB59 after it was amended to include about $25 million more in ongoing funding for a non-refundable income tax credit. earned by the state and about $15 million more in ongoing money to expand eligibility for the state Social Security tax credit.
The bill now goes to the House floor for consideration.
SB59 sponsor Sen. Dan McCay, R-Riverton, welcomed the changes proposed by committee chairman, Rep. Casey Snider, R-Paradise. The new version of the bill absorbs two bills sponsored by House members to include more targeted tax cuts for low-income or fixed-wage Utahns, in addition to a reduction in the tax rate on income that would disproportionately benefit Utahns earning higher wages.
“One of the things we have to constantly check is to make sure we’re focused and focused on proper tax policy that balances all interests because everyone wants a tax cut,” McCay said. “If we are smart and continue to focus on targeted efforts like this, I think Utah can manage itself financially and at the same time balance the fiscal needs of the state, and I think the state l ‘did.”
The original version of SB59 alone would have dropped Utah’s income tax rate from 4.95% to 4.85%. The impact on Utahans would depend proportionally on income levels, but for a family of four earning $72,000 a year, the reduction would mean about $98 more a year.
In this year’s tax cut debate, lawmakers have been caught among those who want an even bigger tax cut, those who think any tax cuts should be targeted more at low-income Utahns. and average, and those who believe that taxpayers’ money would be better spent on programs for the needy.
Responding to those advocating a tax cut that would better help low-income Utahns, Rep. Mike Winder, R-West Valley City, led the effort to create a non-refundable income tax credit earned by the state with HB307. Only working Utahns would qualify for the earned income tax credit.
The non-refundable working income tax credit would increase tax relief for low- and middle-income Utah workers by allowing them to qualify for a state match equal to 15% of the amount of the working income tax credit. federal labor income tax. The amount they would receive in return would depend on family size and income levels, but for a family of four with an annual income of $31,000, the state earned income tax credit would give them an extra $266 on their tax return, Winder said.
A non-refundable tax credit means that taxpayers only receive what they paid in taxes, while a refundable tax credit means that taxpayers are eligible to receive the full amount of the tax credit, regardless regardless of their tax liability.
The other proposal absorbed into SB59 was HB53, a bill sponsored by Rep. Walt Brooks, R-St. George, to extend the state Social Security tax credit. That would translate to an average annual tax savings of about $210 for about 71,257 Utahns in the 2022 tax year, according to the bill’s tax note.
House and Senate legislative leaders said the earned income tax credit and Social Security bills are the tax cut proposals GOP caucus members favor the most. Both bills took shape in closed caucus meetings, with Republicans favoring them as complements to an income tax rate cut — more than Gov. Utahns a tax cut in the form of a $160 million grocery tax credit. , and significantly more than the preference of Democrats and poverty advocates to repeal the state’s share of the food sales tax.
While lawmakers haven’t moved forward on Cox’s refundable grocery tax credit proposal, the governor supports their approach to include a non-refundable earned income tax credit as a strategy to target Utahns low- and middle-income families, Sophia DiCaro, executive director of the Governor’s Office of Planning and Budget, told the House committee on Friday.
“Any tax cut is a good thing,” DiCaro said. “But we can do better for the families who need it most, and this new (version of the bill) helps us get closer to that goal.”
DiCaro noted that Cox had “long been a strong advocate for a state-earned income tax credit,” saying the policy “has proven to provide targeted tax relief to low- and low-income working families.” middle income”.
“We never thought an (earned income tax credit) would be possible this year,” DiCaro said, “but with strong political will in the legislature, Governor Cox is an enthusiastic supporter. whether a state (earned income tax credit), which is a step in the right direction for the benefit of the populations we were seeking to help, is a possibility.
Noting that an earned income tax credit is estimated to provide an average tax relief of about $200 a year to about 80,000 Utahns, DiCaro said it would provide a “significant tax reduction for families in Utah workers who need it most.”
“And that’s where there’s a strong alignment for that,” she said.