Legislative leaders set aside $160 million for tax cuts next year, despite signs of Utah’s cooling economy. This comes after a “historic” $480 million tax cut package approved earlier this year, bringing the total tax reductions since 2021 to about $1 billion.
The $160 million tax cut would lower the income tax rate from 4.65% to 4.55%, with the possibility of favoring higher-income Utahns. Governor Spencer Cox did not include any tax reductions in his budget proposal for fiscal 2025, noting that the state has limited extra funds to spend next year.
New revenue estimates show that income tax revenue last year was nearly $120 million lower than previous estimates, but projections expect a slight increase in the current fiscal year and over 3% growth in fiscal 2025. However, Utah’s Constitution requires income tax revenues to be used for public and higher education and social services for disabled residents, meaning that any tax cuts would come at the expense of future revenues for these purposes.
New House Speaker Mike Schultz, R-Hooper, aims to fund the tax cut package in part by finding places to cut the state budget, acknowledging that the state budget has grown at a faster pace than population and inflation. Legislative leaders also redirected more than $1 billion in appropriations for debt reduction to pay for infrastructure projects next year, with an additional $100 million set aside for compensation increases for some state employees.
It’s important to note that lawmakers have proposed changing the constitutional earmark to allow income tax revenue to pay for more parts of the state budget after certain funding goals for public schools are met, but this change won’t impact next year’s budget process and will only go into effect in 2025 if approved by a majority of voters next year.
