Tax and Budget

The story of tax policy in the 2022 Legislative session is a tale of two tax cuts:

    • A large, top-heavy cut to the income tax rate from 4.95% to 4.85%. How large? $164 million. How top-heavy? 63% of it goes to the top 20% of taxpayers. all of whom have six-figure incomes. 
    • The creation of a small ($16 million, just one-tenth the size of the income tax rate cut) state-level Earned Income Tax Credit. The EITC is widely considered to be the nation's most effective anti-poverty program, since it reduces poverty by promoting work and self-sufficiency. Special recognition goes to Rep. Mike Winder, who, in his final legislative session, leaped at the opportunity to sponsor HB 307 and persuade his colleagues that 2022 was the year to make Utah the 31st state with our own EITC, something that advocates for reducing poverty have sought for decades.

The new Earned Income Tax Credit is non-refundable, which means it will not reach the lowest-income fifth of Utah workers who need it the most, including those struggling to work their way out of intergenerational poverty. About 80% of the value of the federal EITC is the refundable portion, which offsets other federal taxes paid by the lowest income workers. Most state level EITCs are also refundable, allowing them to offset the sales, gas, and property taxes paid by low-income workers to state and local governments. In Utah, the lowest income workers pay, on average, 7.5% of their incomes in those taxes, which is a higher share of their incomes than that paid in all state and local taxes by the highest income Utahns. The new nonrefundable EITC will help moderate income Utahns (the second fifth of the income distribution), primarily those earning between $30,000 and $55,000. Moderate income Utah families certainly need the help, so the creation of a Utah EITC is a great step in the direction of better tax policy. We hope that Utah will soon follow in the footsteps of other states that began with a non-refundable EITC and then decided to make it refundable.  

The income tax rate reduction continues an unfortunate pattern in recent decades of tax breaks for those who need them the least -- tax breaks that both increase inequality and starve Utah's schools of the resources they need to succeed. In 2007 we cut the top income tax rate from 7% to 5%, then in 2018 to 4.95%, now this year to 4.85%.  The income tax is the only non-regressive tax Utah has, the only one that actually lines up with Utah's income distribution. Ironically, as income inequality worsens, it is also Utah's fastest growing source of revenue, which offered Utah our best hope for seeing our education system benefit from Utah's rapid economic growth -- until we began targeting that rapidly growing revenue source for tax cuts.  

Here is a summary chart of this year's tax cuts and how they impact Utahns in each fifth of Utah's income distribution:

SB59 summary chartSource: Utah Legislative Fiscal Analyst (excluding the $15 million corporate portion of the income tax rate cut) 

Another way to think about the income tax rate reduction from 4.95% to 4.85% is to consider how it impacts a median income family of four. According to the Legislative Fiscal Analyst, such a family receives a tax cut of $98. But when you divide the $164 million price tag of the income tax rate reduction by Utah’s K-12 student population of about 675,000, then multiply by the two kids that the median income family of four has in school, you see that that average family that is gaining $98 in a tax break is giving up $485 that is now not going to be spent on their kids’ education every year. Not going to be spent on smaller class sizes or more experienced teachers or more up-to-date technology. Not going to be spent on closing the gaps in our education system between majority and minority groups and between haves and have-nots, gaps which are larger than nationally. 

The choice made by UtLeg fo the Utah middle class family of 4png

It's also important to see this year's income tax rate cut in the context of decades of top-heavy tax breaks passed by the Legislature. According to the Utah State Tax Commission, Utah has been passing, on average, $100 million a year of new tax breaks for over 35 years. This now adds up to over $3.5 billion not available every year to invest in Utah's children -- their education, health care, and basic economic security. In fact, the Invest in Utah's Future Coalition has identified over $5 billion of unmet needs in a wide range of areas of public responsibility. 

For a full summary of this year's legislative actions on taxes, you can....

 

 

 

 

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Voices for Utah Children Statement on the News that the Legislature Is Considering a Constitutional Amendment to End the Education Earmark of Income Tax Revenue:

A Constitutional Amendment Won’t Help If Utah Keeps Cutting Taxes

It is understandable that Utah legislators would want greater flexibility in how they can use public revenues. But there is a much larger problem that increased flexibility would do nothing about and would even delay solving: the chronic public revenue shortages that afflict our state following decades of tax cutting.

Utah has been cutting taxes by an average of $100 million annually for at least the last 35 years. According to Tax Commission data (see slide #8), this now adds up to about $3.5 billion in revenue not available for Utah’s annual state budget every year. As a result, public revenues are now lower than they've been in half a century relative to Utahns' incomes. The decisions in recent decades by Utah's Governors and Legislatures to give in to the tax cut temptation are at the root of Utah’s chronic revenue shortages in nearly every imaginable area of public responsibility, as documented by the Invest in Utah’s Future Coalition.

This year’s decision to pass a $164 million cut in the income tax rate from 4.95% to 4.85% (SB59 1st sub fiscal note) is an unfortunate example of this impulse toward thinking about short-term gain rather than the long-term needs of our state. This change gives a middle-class family of four a $98 tax cut, but it also means that $485 will now not be invested in that family’s two children in school. ($164 million divided by 675,000 children in Utah’s K-12 education system multiplied by two kids)

Every Utah family with children should ask the Governor and Legislative leaders, “Will you use this increased flexibility to enact even more tax cuts that deprive our children of the education that they need and deserve?” If our leaders are not prepared to answer that question unequivocally, then Utahns should know that such an amendment would just enhance budget writers' ability to "rob Peter to pay Paul" and not address the root cause of Utah’s problem.

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We appreciate the many legislators that supported bills affecting children. In summary, it WAS a good year for kids, but we still have plenty to do and we look forward to working together to #investinutahkids!

Early Childhood

Early childhood care and education had several key wins. The legislature approved:

  •  $7m in new funding for Optional Enhanced Kindergarten (which many districts use, with other funding sources, to offer full-day kindergarten)

  • $3m in new funding for School Readiness grants (to support high-quality preschool programs)

  • $5m in newly restored funding for preK-3 teacher professional development.

  • In addition, new legislation directed expansion in eligibility for working families to receive state childcare support, and several bills aimed to create efficiencies and financial stability for the childcare providers these working families rely on. 

Juvenile Justice

In the area of Juvenile Justice, legislators approved several bills that continue the state’s effort to refine ongoing efforts to reform and improve the juvenile justice system, which included:

  • A bold bill outlining and clarifying the Miranda rights of youth who are interrogated by police (ensuring that either parents or attorneys are present for such questioning.

  • An innovative pilot program to offer youth in secure care access to college courses through Dixie State University.

  • Finally, school-based discipline and the role of School Resource Officers (SROs) received some attention, with legislators giving a moratorium on criminal enforcement of state truancy laws during the remaining months of the pandemic and providing additional direction with regard to SRO training in public schools. 

Health

We were thrilled to see our Legislature take significant steps to prioritize children’s health coverage this Session and reduce Utah’s too-high number of uninsured children.

  • House Bill 262 (Representative Welton) provides ongoing funding for CHIP/Medicaid outreach so that more families can connect with affordable health insurance options for their kids. In addition, Senate Bill 158 would have removed barriers to health insurance, so all Utah children could get covered and keep their coverage.

  • In addition to children’s coverage, we saw important steps forward for children’s access to mental health this legislative Session including HB 337, sponsored by Representative Eliason, which will allow more early childhood providers to receive valuable training in infant mental health and also strengthen statewide systems to respond to the mental health needs of young children.

  • The legislature also made changes to ensure that funding for Utah’s maternal mental health program and awareness campaign were made permanent; thanks to Representative Dailey-Provost for championing this change for families.

  • Finally, the legislature also passed a bill that will make it easier for kids to access preventive dental health care. Senate Bill 103, sponsored by Senator Todd Weiler, allows dental hygienists to bill Medicaid, which will help promote greater access to dental care in school-based and childcare settings. 

Cover All Kids Campaign Update

Senate Bill 158 passed the Senate with broad support, but unfortunately it was not funded. We look forward to continuing to support the bill sponsor, Senator Luz Escamilla, and floor sponsor, Representative Francis Gibson, to get this important bill across the finish line next year.

Continuous Medicaid Eligibility Update

Unfortunately, the Legislature did not restore state funding for continuous eligibility for children on Medicaid ages 0-5. Continuous eligibility was funded in the 2020 General Session but eliminated as part of budgetary cuts over the summer. Continuous eligibility guarantees children will have a year of stable Medicaid coverage, as they already have with CHIP. The good news is that thanks to temporary federal requirements, all children currently have this option. However, when the federal public health emergency ends, this option will end too, which could lead to significant loss and disruptions in children’s coverage if state funding is not restored. This past year has shown us just how vital it is that all children and families across Utah have access to health care and coverage. Stable, affordable health coverage for all Utahns will be critical to our state’s ability to rebound and recover.

Other Legislative Priorities 

During this past legislative session, we were happy to support a number of bills that are “good for kids” outside of our main policy priorities including the following bills that include policies that we will continue to work on this upcoming year!

  • We supported and are glad to continue working with the International Rescue Committee on supporting our immigrant and refugee families through HCR 22: Concurrent Resolution Celebrating the Contributions of Multilingual and Multicultural Families to Utah Schools. 
  • HB 338: School District Voter Eligibility Amendments would have created a pathway for school districts to choose whether students age 16-17 can vote in their local elections. It was led by a young person, Dhati Oomen, but unfortunately did not pass. We will continue to further advocate for greater youth civic engagement through this bill and beyond.

  • Lastly, we supported and advocated for SB 214: Official Language Amendments as a positive first step to ensure we have greater language inclusion in our state. While we recognize that this is not a full repeal of the 2000 “English-only” law, this bill does remove funding restrictions and “official communications that exist” while keeping English as the official language in place.  We will continue to work on ensuring this law is repealed completely in the coming year.

Tax and Budget

Tax cuts were a big item of discussion, and there were three tax cuts passed:

  • There was an $18 million Social Security Income Tax Credit

  • $24 million Military Retirement Income Tax Credit

  • $55 million Tax Cut tied to the personal exemption related to the dependent tax credit.  

Voices opposed these three items as they were primarily a benefit to the top 40% of taxpayers and excluded the lowest-income 40% almost entirely.  

We were also advocating for a $7 million Earned Income Tax Credit equal to 10% of the federal EITC targeted to Utahns in intergenerational poverty. This was passed in December 2019 as part of the tax restructuring law that was repealed in the 2020 Session. Lastly, there were two bills to lower the State Income Tax Rate, which did not pass. We were opposed to both bills for a number of reasons.  The cuts would have led to a more regressive tax structure and depriving us of much needed future revenues.

We have many unfunded needs and it is our opinion that we should not cut taxes any further until we address those needs and provide the required funds.

>> Check out our Facebook page for FB Live updates of each policy area. 

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