SALT LAKE CITY — Despite recession storm clouds on the horizon, Utah's financial picture is looking good.
The Utah State Legislature's powerful Executive Appropriations Committee announced a $1.3 billion surplus (up to $3.3 billion including reserves already allocated). With that much money from tax revenues and funding, lawmakers are looking at a tax cut.
On Wednesday, the legislature's Interim Revenue & Taxation Committee passed a bill to cut the income tax rate from 4.85% to 4.8%. The modest half a percentage point isn't expected to stick. Legislative leaders are expected to go lower. The Utah Taxpayers Association, a tax watchdog group, has urged the legislature to make a deeper cut.
But some advocacy groups on Utah's Capitol Hill argue there should be no tax cut — instead, the money should go into other needs in the state.
"Over $5 billion in unmet needs, many of which are in the area of education," Matthew Weinstein of the group Voices for Utah Children told the committee, arguing that teachers, bus drivers and prison workers are underpaid.
"Cutting the income tax rate is not a good return on investment for the average middle class family. If you cut the rate, they get $50, but they’re giving up twice that in investments in children’s education."
The bill passed overwhelmingly out of committee, with only two House Democrats voting against it.
Also on Wednesday, the committee unveiled a proposed constitutional amendment. Right now, up to 45% of a person's property is not taxed. The proposed amendment would make that a 45% minimum. It would also permanently ban real-estate transaction taxes. Utah doesn't currently tax real estate transactions, nor has there been any effort to try to impose them.
Outside Utah, some states have used those taxes to dip into affordable housing.
Sen. Dan McCay, R-Riverton, the chair of the Senate Revenue & Taxation Committee, said he did not believe banning them would hurt the ability to fund affordable housing in the future. He argued the ban would also prompt more transparency in property tax law.
The bill passed out of committee unanimously. If it passes the full legislature, it remains to be seen what voters think of it. Recently, Utah voters rejected a constitutional amendment on special session spending 64% to 36%. Sen. McCay said some of the blame for that amendment's failure was on the legislature, for failing to educate voters about why it was needed.
