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What The Tax Reform Bill Means For Utahns

Photo of capitol facade.
Brian Albers / KUER
Lawmakers passed a tax reform bill Thursday during a special session.

The Utah legislature met in a special session last night to pass a massive tax reform bill. KUER's Nicole Nixon has been following the issue and sat down with Bob Nelson to explain what it all means.

Bob Nelson: Lawmakers will get together in just over a month for the regular legislative session. Why pass this in a in a special session?

Nicole Nixon: Well, it's something they've spent really the entire year working on. It comes because they've had some budget sort of issues the past few years. The sales tax is still growing, but it's slowed a lot. The income tax, meanwhile, continues to grow at a really fast pace in Utah. So, there's some budget issues at play here. The other thing is that lawmakers really wanted to get this done — include a big sizable tax cut in this bill and pass that by 2020. They wanted to pass the benefit of a tax cut as soon as possible to Utahns.

BN: What actually is in the bill? What will it mean for Utahns pocketbooks?

NN: We mentioned the tax cut. That's about 160 million dollars. What that means for an average family of four in Utah making about $60,000 -- they'll see a benefit of about 500 fewer dollars paid in taxes annually. The way the legislature has done this, they're putting more sales taxes on more things because the sales tax is growing slower. They're raising the sales tax on food in grocery stores, which is currently taxed at a lower rate. They're putting a new sales tax on gasoline at the wholesale level and can we can expect that to be passed on to drivers.

We'll also see new sales taxes on things that currently are not taxed, things like parking fees and ridesharing services, Netflix, media streaming and things like pet grooming. The argument for doing that is that the economy is changing, Utahns are spending a lot more money on services rather than physical goods.

Meanwhile, they're cutting the income tax by about three-tenths of a percent, and they approved a few tax more tax credits that are aimed at lower and middle income families. At the last minute last night, they put in some things they're calling "prebates" to make up for like the food tax and things like that. They're hoping to deliver actual checks of $100, $200 to Utah families before April. That's when sales taxes go up — also, tax day.

The last thing is they bumped up the dependent exemption — this is your tax break for having children — to make up for federal tax reform two years ago when that was slashed and Utahns with big families paid a few extra in taxes last year. So, Utah legislature wanted to put that back to where it was.

BN: So, it's not really polished. We're assuming this is not really quite over?

NN: No. So, first of all, this was a pretty unpopular bill. All of the Democrats last night and a handful of Republican lawmakers in both chambers voted against it. The bill did just miss passing by the two-thirds majority that the legislature needs to make it take effect immediately. That also means that it could be repealed by a citizen referendum if any opponents wanted to launch one.

But we do have a legislative session coming up next month. Lawmakers will probably continue to do a few things, pass a few tweaks on tax reform. They just wanted to pass a base tax reform bill with that tax cut.

Of course, next year is an election year. It always looks good to campaign on a tax cut in an election year. About two-thirds of the legislature is up for reelection. So, one of the leaders pushing this says that this is just the beginning. They hinted possibly even more services getting taxed later down the road.

Also, one thing they didn't tackle is education. They cut income taxes, which affects education funding by more than half a billion dollars. And there's a big question remaining over how to fund that going forward, because we've been last in the nation in per pupil spending for a long time. Lawmakers say that the way schools are funded now doesn't leave them a lot of flexibility. And they didn't address that this time. So, we'll see more on that next month, probably even on the November ballot next year for education funding. It's always been a big issue, but probably at the forefront in 2020.

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