The Utah Legislature is poised to cut taxes for a fifth year, but Republican legislative leaders have different ideas than Gov. Spencer Cox. (Illustration by Alex Cochran for Utah News Dispatch)
Utah’s Republican-controlled Legislature is poised to cut taxes in some way yet again — for a fifth year in a row.
While the governor has his preferences, lawmakers will have their own ideas to hash out. And that may include yet another income tax rate cut.
As part of his budget recommendation, Cox proposed nixing the state’s tax on Social Security benefits, estimated to cost the state about $143.8 million a year.
Currently, Utah households that receive Social Security and earn less than $75,000 can already qualify for a Social Security benefit tax credit. However, the governor’s proposal would help reduce income taxes for an estimated 150,000 more taxpayers — to the tune of about $950 a year for the average filer.
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Cox said he supports totally repealing Utah’s tax on Social Security benefits as a tax cut “targeted to our seniors.” He also proposed using $2.1 million to expand the state’s child tax credit for families of up to four children.
However, Utah’s Republican legislative leaders aren’t fully committing to supporting Cox’s proposal. House Speaker Mike Schultz, R-Hooper, and Senate President Stuart Adams, R-Layton, said they’re supportive of reducing the Social Security tax on benefits at least partially, but they also said lawmakers will be considering other ideas.
“We want to provide tax cuts to every citizen, including those on Social Security,” Schultz said.
While it remains to be seen exactly what lawmakers will do, Schultz said, “I believe something will be done on Social Security. Whether it goes as what the governor wants, that’s yet to be determined.”
Schultz said that may entail yet another reduction to Utah’s income tax rate. That’s something Adams decisively said he’d like to see — in addition to expanding the Social Security tax credit. But that may mean perhaps not removing the tax on Social Security benefits entirely.
“I support trying to do both,” Adams said. He added that the income cap on the Social Security tax credit “might go from $75,000 to $100,000 or something,” though that depends on the budgeting process.
“We only have so much money, so we’ll start running the data and figuring it out,” Adams said. “But I support doing both, not just one.”
Yet another income tax cut, but no larger tax reform discussion
Last legislative session, the 2024 Utah Legislature passed a $167 million income tax cut, dropping Utah’s rate from 4.65% to 4.55% — just one year after the 2023 Utah Legislature dropped the rate from 4.85% to 4.65%.
During the debate around last year’s income tax rate cut, opponents argued lawmakers should keep the money in their budget to pay for unmet needs in education, housing, homelessness and other priorities.
Critics also noted income tax cuts largely benefit the wealthy. For last year’s cut, an analysis by the Institute on Taxation and Economic Policy, a nonprofit liberal tax policy think tank, showed it would disproportionately benefit Utah’s highest earners, with over 60% of the cut going to the state’s top 20% of income earners.
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Schultz and Adams have long supported getting rid of Utah’s income tax cut entirely — though that would require major tax reform. While the governor last year encouraged having that broader discussion if lawmakers are going to continue hacking away at the state’s income tax, Adams said he doesn’t expect lawmakers to tackle tax reform in 2025.
“Not this year,” Adams said.
House Minority Leader Angela Romero, D-Salt Lake City, said she hasn’t supported any of the tax cuts recently passed by the Utah Legislature because she’d “rather see that money go into the services that we need,” such as addressing homelessness and helping people with disabilities.
However, while Romero said she likes the governor’s proposal to remove the state’s tax on Social Security, she’s not in favor of another income tax cut that she said won’t help middle or working class Utahns as much as higher earners.
Repeal of state’s portion of sales tax on food ‘long gone’
There’s another tax cut option that top legislative leaders say they will not be pursuing: removing the state’s portion of sales tax on food.
That’s something low-income advocates have long called for, and it’s a proposal that Senate Minority Leader Luz Escamilla, D-Salt Lake City, said she and other Democrats continue to support.
“We’re still going to continue to fight,” Escamilla said, arguing that repealing the food tax should “stand on its own as good public policy, a progressive tax cut.”
However, the proposal to eliminate the state food tax is “long gone,” Adams said, because of Amendment A’s failure — voided by the courts.
In 2023, the Utah Legislature put that proposed constitutional amendment on the 2024 ballot to ask voters to approve removing the state’s earmark on income tax dollars for education (something public education advocates have railed against). As part of that effort, lawmakers also proposed eliminating the state’s portion of sales tax on food — but only if voters approved removing the education earmark.
But in October a judge voided that ballot question, Amendment A, after Utah’s largest teacher union and other plaintiffs sued. The courts voided it because lawmakers failed to properly publish the proposed constitutional amendment and ruled that even though the question was printed on the Nov. 5 ballot, votes wouldn’t be counted.
Judge voids Amendment A: Question on education earmark will appear on ballots, but won’t count
In 2023, Republican legislators argued that making the repeal of the state’s food tax contingent on the removal of the education earmark was necessary because state officials have long said the state’s budget has faced a “structural imbalance” due to income tax revenue growth (which funds education) outpacing other types of revenue growth, which fund other needs from the general fund.
For now, it appears lawmakers are abandoning that effort. It’s possible they could try to propose another form of Amendment A, but the next opportunity for that question to be placed on the ballot isn’t until 2026.
“If we can’t get the initiative on the ballot, the solution is just get rid of income tax,” Adams said, adding that he won’t support removing the state’s food tax without addressing the state’s budgetary imbalance by removing the education earmark.
“You have to have one tax or the other. I was in favor of actually reducing the sales tax on food if we could fix our income tax problem,” Adams said. “Obviously we can’t fix that problem, so the solution is get rid of income tax, and we’re probably going to continue to have sales tax. So I’m not in favor of cutting any — any — sales tax until we fix our structural imbalance.”
Still, the Executive Appropriations Committee last month set aside about $165 million in ongoing revenue that was originally reserved for that food tax repeal for some other form of tax relief.
Escamilla urged “caution,” saying “I don’t know that we should be cutting anymore” given the past four legislative sessions have culminated in more than $1 billion in tax cuts. However, she said she’s more in favor of repealing the state’s portion of sales tax on food and the governor’s Social Security proposal.
However, because they hold the purse strings, it’s now up to the larger Legislature to decide. The 2025 Utah Legislature is scheduled to convene on Jan. 21.
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