The session hasn’t even started yet, and the Utah Legislature is already poised to cut taxes for a fourth year in a row.

That’s even though Gov. Spencer Cox says a larger tax reform conversation is needed if the state is going to continue chipping away at its income tax and eventually do away with it for good — something the state’s Republican governor and legislative leaders say they eventually want to see happen. Still, the governor said he’ll support another cut this year if it’s what legislative leaders want.

Last month, the Executive Appropriations Committee set aside $160 million for some sort of tax cut, meaning the state is poised to cut taxes again (though the budget process still needs to play out). The Legislature needs to decide exactly what form a tax cut would take, but Senate President Stuart Adams, R-Layton, and House Speaker Mike Schultz, R-Hooper, said it’s likely to be another income tax rate cut. Utah’s current income tax rate is 4.65%, down from 4.85% after last year’s tax cut package.

For the past three years the Utah Legislature has cut taxes totaling around $1 billion, and “we want to add a fourth year if we can get it done,” Adams said.

This is where Cox differs slightly from Adams and Schultz. The governor notably didn’t include another tax cut in his budget recommendation — at least not this year. But he’s also not opposed to it if that’s what lawmakers decide to do.

“Ultimately what they want to do and what I want to do is get rid of the income tax completely,” Cox said, but that will require a larger conversation about how to replace income tax revenue.

That would mean major tax reform — and that’s not likely to happen this session, according to legislative leaders.

Cox said if lawmakers want another tax cut, “I will always support tax cuts. But I think we need to be more thoughtful about where the end goal is and what that looks like, and I don’t think we’ve done that quite yet.”

“What we’ve been doing is just kind of incremental small cuts (toward) that,” Cox said. “We can never get rid of the income tax without replacing it with something else. So my encouragement has been if we’re going to keep doing this, let’s be serious about it and let’s have those broader discussions. What do we want the tax structure to look like?”

Why keep cutting taxes without broader tax reform?

Schultz acknowledged that lawmakers need to have a larger conversation about “replacing the income tax,” but he said it’s also about “taking less dollars from the citizens of the state.” That’s why he thinks the state should take another stab at reducing the income tax rate in the meantime.

“There are 30 other states in this nation that have a lower tax burden on their citizens,” Schultz said. “That’s concerning to me.”

Historically, opponents of cutting income taxes have expressed concerns about chipping away at the state’s revenue that’s been reserved under the state constitution for education, though in 2020 voters approved a constitutional amendment to expand that earmark so income tax dollars could also be used for programs for children and people with disabilities.

During the 2023 session, lawmakers passed another constitutional amendment for the 2024 ballot that would remove the state’s earmark on income tax for education, which legislative leaders have said would give them more flexibility in a budget that’s seen income tax dollars grow disproportionately to other sales tax revenue. They approved another constitutional amendment question about repealing the state’s sales tax on food to the tune of $200 million — which has been long sought by advocates for low-income Utahns — but made it contingent on the education earmark’s removal.

Education advocates have long opposed removing that earmark on income tax dollars, but Adams said Utah will continue to prioritize education spending, regardless of the revenue stream.

“We can actually spend sales tax money, general fund money, on education,” Adams said. “Everybody thinks income tax is the only thing we spend on education. … So this isn’t a matter of what pocket we take the money out of, it’s a matter of tax policy. There are other revenue streams we can find to be able to fund the services of the state, and we need to continue to reduce the income tax.”

When pressed on how Utah would eventually replace revenue lost by continuing to reduce the state’s income tax rate, Adams said, “obviously consumption, sales tax.” But specifics on how the state would do that is a larger conversation for another day, he said.

“Right now, the best thing is to leave the sales tax and just cut the income tax,” Adams said. “But we’ll continue (discussing). As our economy grows, we could choose to cut sales tax, but if we’re going to cut a tax we’re going to cut income tax and let sales tax continue to grow.”

In 2019, Utah lawmakers passed a controversial tax reform package that reduced the income tax rate but also raised sales tax on food, certain services and gas — but swiftly repealed it after a referendum campaign had secured enough signatures to challenge it at the ballot. They haven’t revisited broader tax reform since, but have made incremental steps like income tax reductions and putting the education earmark up for a vote on the 2024 ballot.

This year also marks an election year for Utah state leaders, likely politically motivating lawmakers to go for another income tax cut but deterring them from raising or implementing new taxes in the same session.

Tax cuts — and possibly other budget cuts

It’s a tighter budget year compared to past years due to the cooling economy, the end of federal COVID-19 stimulus and three years of  tax cuts totaling $1 billion. Still, the state’s budget is growing.

Based on the latest new revenue projections, legislative budget staff estimate lawmakers will have about $134 million in new one-time money and over $504 million in new ongoing funds available to spend. However, they warned that about $150 million of those ongoing funds, or funds estimated to be available to spend indefinitely each year, should be considered “high risk” and it may not all come to fruition due to economic uncertainty and volatility.

Still, the Executive Appropriations Committee set aside $160 million of that new ongoing revenue for tax cuts, even though Utah lawmakers are sure to face no shortage of requests for big issues like housing, homelessness, education, transportation and water.

Schultz said inflation is putting pressure on Utahns, and “we need to find ways to allow our citizens to keep more of their hard-earned dollars.”

Senate Minority Leader Luz Escamilla, D-Salt Lake City, and Rep. Angela Romero, D-Salt Lake City, argue another income tax cut is not what Utahns need right now, noting it would largely benefit higher earners.

Escamilla said she’d rather see more money spent to address other issues like child care and health care, while Romero said she’d like to see more funding go toward sexual assault, domestic violence and child sex abuse issues, along with other big issues like housing, homelessness and the preservation of the Great Salt Lake.

“I really have concerns about doing another tax break when we can be providing more resources for some of our most vulnerable members in our community,” Romero said. She noted that an income tax cut would largely benefit higher earners compared to middle- or low-income Utahns.

Republican legislative leaders, meanwhile, say they want to balance Utah’s budget priorities while also cutting taxes — something Adams said will “stimulate the economy” and “create additional tax revenue” in the future.

“When you cut taxes, you put more money in people’s pockets. When you put more money in people’s pockets, generally they spend it. When they spend it, it facilitates a more robust economy, which you experience in Utah, which actually creates additional revenue,” Adams said. “It’s an upward spiral that keeps going.”

Meanwhile, the Utah Taxpayers Association, a nonprofit that works to limit state and local taxes, is urging lawmakers this year to not only continue cutting income tax, but also make serious efforts to find and root out excess or unnecessary spending.

“We hope that that is a concerted effort this session and every session going forward, because the ongoing budget has gone way up,” said Rusty Cannon, president of the Utah Taxpayers Association.  In a recent post, the association wrote it’s “time to cool the jets” and “cut the state budget,” noting Utah’s ongoing budget was $7.5 billion in 2019 and has since grown to $11.1 billion in 2024.

Cannon said if the state wants to spend more money on other priorities, it should look for places to trim rather than spending all the new money the state gets in its coffers each year.

Legislative leaders have given a “warm reception” to a more “intense” appropriations process, he said, so there may be a change in how lawmakers hash out the budget this year.

What gets cut — if anything — will be decided during the budget process. But Schultz said during the Utah Taxpayers Association’s annual conference at The Grand America Hotel in Salt Lake City on Monday that state agencies have been directed to look for cuts.

“Our agencies are all really excited,” Schultz said sarcastically, “because they’ve been prepped to take reductions. We’ve got a lot of pushback, but that’s OK. That’s part of the process. … We’ll work with them closely to make sure that we’re making good decisions.”

Utah News Dispatch is a nonprofit, nonpartisan news source covering government, policy and the issues most impacting the lives of Utahns.

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