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. 

Published in News & Blog
February 24, 2021

The High Price of Lower Taxes

Legislative leaders have said that 2021 should be “the year of the tax cut.” Numerous public opinion surveys show that Utahns disagree. This may come as a surprise to policymakers, who have been in the habit of handing out tax break after tax break for decades.

But there seems to be an increasing public awareness that Utah is now paying a price for decades of tax cutting that have left us with the lowest overall tax level in 50 years relative to Utah personal income.

UTAH'S URGENT UNMET NEEDS

We all like being able to pay less in taxes. But there is a growing understanding that tax cuts are leaving us unable to address the long list of urgent unmet needs in education, infrastructure, social services, air quality, public health, and many other areas that affect our standard of living and quality of life. All of these issues will shape the Utah that our children will one day inherit. 

Outlined below are some examples of the urgent unmet needs in Utah. 

Early Care and Education

Amount

Unmet Need

$500-600 Million/Year

Envision Utah estimates that we need to invest an additional $500-600 million each year just to reduce teacher turnover, where we rank among the worst in the nation. 

Our leaders’ unwillingness to solve our education underinvestment problem is why our high school graduation rate is below the national average (after adjusting for demographics) and our younger generation of adults (age 25-34) have fallen behind their counterparts nationally for educational attainment at the college level (BA/BS+).

$52.5 Million/Year Voices for Utah Children estimates that it will cost $52.5 million to make full-day Kindergarten available to all Utah families who would choose to opt in to it.
$1 Billion Well over $1 billion is one estimate for a much needed comprehensive system of early childhood care and education (pre-k) in Utah.

 

Health

Amount

Unmet Need

$59 Million/Year

It would cost Utah about $59 million each year to cover all of our 82,000 uninsured children.

The longstanding preference for tax cuts over covering all kids is why we rank last in the nation for covering the one-in-six Utah kids who are Latinx and why the state as a whole ranks in the bottom 10 nationally for uninsured children.

 

Human Services

Area 

Unmet Need

Mental Health & Substance Abuse Treatment

Utah ranks last in the nation for mental health treatment access, according to a 2019 report from the Gardner Policy Institute.

A 2020 report from the Legislative Auditor General found that Utah’s Justice Reinvestment Initiative had failed to achieve its goal to reduce recidivism -- and actually saw recidivism rise -- in part because “both the availability and the quality of the drug addiction and mental health treatment are still inadequate.” (pg 51)

Disability Services

The DSPD disability services waiting list has doubled in the last decade from 1,953 people with disabilities in 2010 to 3,911 in 2020.

The FY20 $1 million one-time appropriation made it possible to provide services to 143 people from the waiting list.  

Domestic Violence The Utah Domestic Violence Coalition 2017 Needs Assessment identified insufficient funding for shelters, affordable housing, child care, legal representation, and mental health and substance abuse treatment services as major obstacles to protecting women from domestic violence. 
Seniors

The official poverty measure undercounts senior poverty by about a third because it does not consider the impact of out-of-pocket medical expenses.

2018 study found that seniors spent $5,503 per person on out-of-pocket medical expenses in 2013, making up 41% of their Social Security income. (For most seniors, Social Security is the majority of their income, and it makes up 90% or more of income for 21% of married couples and about 45% of unmarried seniors.)  

 

Infrastructure, Environment, and Housing

 Area

Unmet Need

Infrastructure

The American Society of Civil Engineers gives Utah a C+ grade for infrastructure in its December 2020 report

The Utah Transportation Coalition has identified a funding shortfall of nearly $8 billion over the next two decades.

Air Quality  The Wasatch Front ranks as the 11th worst air quality in the nation for ozone and 7th worst for short-term particle pollution
Housing

Affordable housing units fall 41,266 units short of meeting the need for the 64,797 households earning less than $24,600. Among extremely low-income renter households, 71% pay more than 50% of their income for housing, which is considered a severe housing burden.

The FY21 affordable housing appropriation request for $35 million from Sen. Anderegg, which was already just a small step in the right direction, was reduced to just $5 million.

 

WHY TAX CUTS ARE A BIG DEAL

Some legislators have said to us, "What's the big deal with $100 million of tax cuts out of a $22 billion budget?".

The big deal is that we’ve been cutting, on average, about $100 million every single year for the last 25 years.

Voices for Utah Children’s research has found that tax cuts from the last 25 years has left us short $2.4 billion each year, amounting to an 18% cut to public revenues.

One could even call us a “slow-motion Kansas” because in 2012 they cut taxes overnight by 15%, leading to an economic slump and political backlash that saw the Republican legislature reverse the cuts in 2017 and the public elect a Democratic governor in 2018.

But here in Utah, we’re like the proverbial frog in the pot of water heating on the stove. The devastating impacts of these revenue reductions have been slow and incremental, so we’ve come to accept as normal a state of affairs that Kansans quickly reversed.

Instead of figuring out the fairest way to restore some of those lost revenues so we can address our most urgent challenges, Utah’s political leadership continues to pass new tax cuts every year, generally skewed toward the top of the income scale.

For example, Voices for Utah Children analyzed two of the tax cuts proposed this year and found that they excluded lower-income Utahns completely and mostly went to the highest-income households – even though their supporters said publicly that they are intended to help low- and middle-income Utahns.

Public opinion surveys conducted last year by the Deseret News and Hinckley Institute, by the Utah Foundation, and by Envision Utah all found a strong popular preference for public investment over tax cuts.

Same thing with surveys this month by the Deseret News-Hinckley Institute and by Voices for Utah Children.

Breaking old habits can be hard. As is often the case, the public appears to be ahead of our political leaders. But let's hope that they too will eventually come to appreciate the wisdom of their constituents, who are increasingly aware of the high price Utah is paying for lower taxes.


Utah has been fortunate in weathering the current recession. This gives us a unique opportunity to be able to make smart long-term investments at a time when other states are cutting budgets. As a State we need to take advantage of this situation and invest in Utah kids, not tax cuts.

THIS OP-ED APPEARED IN THE SALT LAKE TRIBUNE ON MARCH 1, 2021

Published in News & Blog
February 22, 2021

Tax Cut Survey Results

Voices for Utah Children Releases Tax Cut Survey Results:

90% Support Investing In Utah Kids Rather Than Tax Cuts

Salt Lake City -- Today, February 23, 2021, Voices for Utah Children released the current results of our Tax Cut Survey.

The Tax Cut Survey is an online survey open to the public and posted at https://utahchildren.org/newsroom/speaking-of-kids-blog/item/1112-tax-cut-survey. The survey has been advertised to hundreds of thousands of Utahns through ads in the Deseret News and Salt Lake Tribune that included graphics like this one: 

 Tax Survey 300x250 Laneta

THE RESULTS.... (drum roll please....)

So far, hundreds of Utahns from all over the state have participated in the survey, which consists of two questions: 

1.When it comes to tax cuts, is your overall opinion closer to A or B (select one)

A. We should invest in Utah kids -- their education, healthcare, and other critical needs -- rather than tax cuts, especially in light of the fact that Utah's taxes are already at a 50-year low.

B,   We should continue cutting taxes because state government has more than enough resources to accomplish what it needs to accomplish. 

90% of survey participants chose A, and 10% chose B, as illustrated in the following pie chart graphic:

TaxCutSurvey90 10chart

In question 2, the survey asked: "How would you rank the following seven possible tax cuts?"

Participants ranked the seven options as follows, in order from most popular to least popular:

1) One-time Utah tax rebates for low incomes ($200/person)

2) Utah EITC -- a state match for the federal Earned Income Tax Credit for low and moderate incomes

3) One-time Utah tax rebates for low and moderate incomes ($100/person)

4) Military pension and Social Security tax credit for low-income retirees

5) Child tax exemption expansion for middle- and upper-income families with children

6) Military pension and Social Security tax credit for high-income retirees

7) Income tax rate reduction (mostly benefits high-income households)

The survey webpage also includes a detailed description of each of the proposals, including bill numbers for some of the items.

WHAT DO THESE RESULTS MEAN?

The response to the first question -- a strong public disinclination to support tax cuts -- is consistent with three surveys done in 2020 -- all of which were rigorous public opinion surveys intended to accurately reflect the views of Utahns in all their diversity, unlike this open, online survey. Those three surveys last year were conducted by the Deseret News and Hinckley Institute, by the Utah Foundation, and by Envision Utah, and they all found a similar strong popular preference for public investment over tax cuts. A new survey this month by the Deseret News and Hinckley Institute also found majority support for investing in Utah's future rather than cutting taxes. 

The response to the second question -- a clear inclination to favor tax cuts for lower-income Utahns over tax cuts for upper-income Utahns -- runs counter to the plans outlined by Legislative leaders this week to pass tax cuts that mostly benefit upper income Utahns and exclude lower-income Utahns from tax relief. A detailed analysis of two of those proposals is on the Voices for Utah Children website.

Survey participants were offered the opportunity to share their location and any additional thoughts, and here are some of the comments that were left:

  • A survey participant from Clearfield commented, "I love EITC. It helps those who need it most and rewards people for working. If this passes, I would really like to see more singles and older couples who are not currently included in federal EITC included. This may be a targeted way to help low-income seniors."
  • A survey participant from Mt. Pleasant commented, "I am a US Army Reserve retiree. Every year the State of Utah gouges me for more than the feds Give the military, especially the lower income USAR retirees a tax break."
  • A survey participant from Sandy commented, "We need to invest in getting people out of poverty!"
  • A survey participant from Millcreek commented, "My # 1 would be removing the sales tax on food completely."
  • A survey participant from Pleasant Grove commented, "invest in services and affordable starter homes; it's a Pandemic! and the need is so great for Utah families with low to mid incomes."
  • A survey participant from West Jordan commented, "I believe we need to leave the taxes alone for now and take care of our low income citizens.  Our DSPD [disability services] waitlist is shameful and individuals are waiting for services."
  • A survey participant from Midvale commented, "I'm okay with paying my taxes. If you want to look at a place where people don't pay enough taxes, look at India. Look at Russia, look at Mexico. Let's make sure that money collected by the government is being spent on families, education, healthcare and keeping our cities and towns running efficiently and effectively for EVERYONE. We know that trickledown economics has a limited effect and let's not let the highest earners amongst us allow themselves to imagine that somehow the proportion of what they are able to take from the system should be greater than what they need to pay into the system - like the rest of us."
  • A survey participant from Brigham City commented, "Tax the rich people MORE!!!"
  • A survey participant from Sandy commented, "We don't need a tax cut. We need to increase taxes specifically to provide additional help to low income families, especially children in low income families, and especially those at or below the poverty line."
  • A survey participant from Provo commented, "Successful business people invest in their businesses. Successful citizens invest in their children"
  • A survey participant from Sandy commented, "I am single income, no kids (SINK) and my taxes are awful.  However, I definitely want to help low income families."
  • A survey participant from Spanish Fork commented, "Eliminate taxes on Social security benefits."
  • A survey participant from Farmington commented, "I do not favor reinstating sales tax on food."
  • A survey participant from Holladay commented, "tax rebates are stupid, one-time cash gifts when SO MANY public sectors dealing with education and the homeless need to be funded!"

Voices for Utah Children's Fiscal Policy Director Matthew Weinstein commented, "Political leaders are calling for tax cuts, but average Utahns are not. Utahns see the state of our schools and the unmet needs in so many areas of public responsibility. Utahns want to see our leaders solve those problems, especially as we continue to grapple with all the challenges of the COVID pandemic and recession."

The survey remains open through the end of the legislative session on March 5. All Utahns are invited to express their views at https://utahchildren.org/newsroom/speaking-of-kids-blog/item/1112-tax-cut-survey.

In addition, Utahns who want to write their legislators about this issue are invited to make use of our customizable form letter by clicking here

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