A soap box derby finish line celebration.

Impacts of Tax Reform Passage

davidwicaiBlog, Legislature

The passage of tax reform by the Utah Legislature has some notable and positive impacts for the department.

Legislators have focused on tax reform for nearly a year, especially after it failed to pass during the 2019 General Session. Those months of work resulted in Senate Bill 2001, which passed the Legislature during a special session on Thursday, Dec. 12.

The heart of SB2001 is an income tax cut that will average about $500 for a family of four. Legislators also approved a one-time “pre-bate” of $200 for dependents that will be issued in February and March because they didn’t have the votes to have the tax cut take effect immediately.

Aside from a tax cut, the primary goal of the tax reform was to reduce the volatility of sales tax revenue. To do so, SB2001 removes the exemption for food from sales taxes and taxes some services.

On Friday, based on the passage of the tax reform bill, the Executive Appropriations Committee made some significant additional decisions.

Ongoing grant funding: During the last session, more than $300 million in funding that was supposed to be ongoing was only passed as one-time because of the failure of tax reform. That included an additional $2 million for arts and museums grant funding. After the passage of SB2001, legislative leaders (who make up the Executive Appropriations Committee) shifted all of those funding items to ongoing, including the $2 million, for the next fiscal year.

Revised revenue estimates: Although a notable cut to income taxes, SB2001 increases sales tax revenue. That changes the previously release revenue estimates. The overall surplus is now $474 million, down from the $682 announced last week. Of that surplus, $363 is ongoing and $111 is one-time. The ongoing general fund surplus, however, increased significantly, which is important because that is the source of most of the department’s funding. It is now $149 million, up from $42 million.

What’s Next: The governor is expected to release his budget proposal in early January. Typically, he releases it in early December, but postponed it this year to see if tax reform would be finished.

Please note: The tax reform bill has a number of specific impacts on individuals and groups that are not considered in this post because of the complexity of the issues. Some of those include communities we serve directly or organizations and companies we consider partners. Also, the tax reform summary is exactly that: a summary, and a very superficial one at that. Every individual’s situation will be different.