A tax cut for Utahns is a key ingredient to lawmakers’ plan to rewrite the state tax code. But under tax reform plans currently being considered, about one in five Utahns — mostly those without children — would pay more in taxes.
That’s because a big chunk of tax cuts would come from the so-called dependent exemption, which members of the Legislature’s Tax Restructuring and Equalization Task Force want to bump from $565 to $2,500 per child.
Rep. Robert Spendlove, R-Sandy, an economist and task force member, says the dramatic rise in the exemption is to make up for federal tax reform, which lowered the dependent exemption in 2018. As a result, many larger families saw tax increases last year.
Under options currently being considered by Utah’s tax reform task force, the largest group that would see a tax hike are “people that are claimed by others on their tax forms,” Spendlove said. “It’s usually dependent children, but it can also be older adults who are claimed on their parents’ forms.”
He noted that in those cases, while some family members’ individual taxes may go up, the overall household could see a net-tax reduction. But he acknowledged that some smaller families and childless couples may not get a tax cut under the plan.
As a way to reduce the impact on empty nesters and childless couples, the task force is considering allowing one exemption of $2,500 for couples who file jointly but claim no children.
“We’re always looking (at), how do we minimize the effect on the most taxpayers available,” House Majority Leader and task force co-chair Francis Gibson, R-Mapleton said after the group’s latest meeting Monday night.
Details of the legislature’s tax reform plan are still being worked out, but leaders say the basic tenets include expanded sales taxes, an income tax cut of a little more than 0.3%, and expanded tax credits for low- and middle-income Utahns.
The task force is scheduled to meet again on Dec. 9 — the same week some lawmakers are asking for a special session to pass a tax reform plan.
“People operate best on deadlines. If we just say, ‘We’re going to keep working on this until we come up with something,’ that doesn’t get people moving,” Spendlove said. “We want to have this done by a certain deadline and we’re moving toward that deadline.”
While top legislative Republicans on the task force say a special session would allow many Utahns to benefit from a tax cut in 2020, some have called on the task force to slow down and pass a tax reform package during the general session which begins in late January.