Here’s what a new poll says about eliminating Utah’s state income tax
A majority of Utahns want to see the state’s income tax gone, but just over 40% are either against or not sure about getting rid it, according to a new Deseret News/Hinckley Institute of Politics poll.
Although that’s not likely to be seriously considered anytime soon, eliminating the state income tax has the support of 59% of Utahns, but 27% are against the idea, and 14% don’t know whether the revenue source should stay or go, the poll found.
The poll was conducted by Dan Jones & Associates Jan. 16-21 of 801 registered Utah voters for the Deseret News and the University of Utah’s Hinckley Institute of Politics, and has a margin of error of plus or minus 3.02 percentage points.
“It’s a starting point,” Hinckley Institute of Politics Director Jason Perry said of the public support for eliminating Utah’s income tax measured in the poll, “an indication that Utahns are willing to have this discussion.”
More polling is needed, he said, to find out what tax increases Utahns would be willing to accept to make up for losing the largest source of state-collected revenue, expected to bring in more than $7 billion in the budget year that begins July 1.
Coming up with that additional revenue would take, for example, raising Utah’s 4.85% state sales tax rate to nearly 12% on currently taxed items. Another option for replacing Utah’s income tax is state property tax.
“There may be a line that Utahns are not willing to cross,” Perry said.
Who wants to end Utah’s income tax?
It was Gov. Spencer Cox who started talking publicly about doing away entirely with state income tax rather than just continue to chip away at the rate individuals and corporations pay as lawmakers have done for nearly two decades.
“I would rather get rid of the income tax altogether,” the governor declared at the Utah Taxpayers Association’s annual legislative outlook conference, held before the mid-January start of the Utah Legislature’s 45-day session.
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Cox has not offered any specifics about what shifting from a three- to a “two-legged” tax structure dependent on sales and property tax revenues to fund the state government could look like and did not include any tax cuts in his proposed $29.5 billion budget.
The governor did not comment on the poll results.
Leaders of the Legislature’s Republican supermajority say they’ve been working toward ending the income tax since then-Gov. Jon Huntsman Jr. successfully moved the state from a variable income tax rate as high as 7.5% to a single, or flat, rate of 5% nearly 20 years ago.
Senate President Stuart Adams, R-Layton, was pleased with the poll results.
“I think those are great numbers,” Adams said. “They don’t know what it entails. There’s a lot of concern, probably, about not knowing. And then of course, the income tax has been tied to education.”
Another round of reductions in the income tax is what’s on this year’s legislative agenda. The state gave preliminary approval along party lines Tuesday to a bill slicing the individual and corporate income tax rate from 4.65% to 4.55%.
The income tax cut would add up to a $160 million drop in income tax collections, the amount legislative leaders set aside late last year for a tax cut. But it won’t be finalized until revenue estimates are updated later in the session.
Besides what would be a fourth year of tax cuts, lawmakers are focused on getting voter approval in November for an amendment to the Utah Constitution ending the requirement that income taxes be used only to fund education and some social services programs.
Under a companion bill to the constitutional amendment passed by the 2023 Legislature, if voters agree to the constitutional amendment, the state sales tax on food would be removed.
Adams said he thought the poll results might have been against eliminating the income tax, because of concerns about the impact on school funding as well as on other state spending.
“People like services, too. Even if they don’t understand (it goes to) education, they like to drive on roads and they understand the need for government services,” he said. “I’m actually shocked that it’s that high.”
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The Legislature’s Democratic minority, which came out against this year’s income tax cut at the start of the session, are waiting to hear more about what the Republican governor and legislative leaders have in mind.
“I know that we have, as a group, talked. I don’t know that there’s been an official statement. I think in general, though, we don’t see this as a time where less money available to support Utahns would be a good idea,” said Senate Minority Assistant Whip Jen Plumb.
The Salt Lake City Democrat pointed out the lack of details to date.
“If you’re actually going to propose something, what are you going to switch it with,” Plumb asked. “I’ve heard nothing about that.”
What revenue source would replace Utah’s state income tax?
There apparently is no rush to come up with exactly how to end Utah’s income tax.
“We think it will take us years to be able to eliminate it, even though we’re moving in that direction,” the Senate president said, adding that he hopes those years don’t add up to decades. “I may not be around, but I’ll keep working on it as long as I am here.”
For now, though, the attention is on the constitutional amendment that lawmakers say is needed to give them more budgeting flexibility. The Legislature’s most recent tax reform package ended up being repealed amid a backlash from Utahns over a hike in some taxes.
Whether that amendment passes is expected to affect the timing of future legislative action on Utah’s tax structure, including efforts to eventually replace the state income tax with other revenue sources.
“That surely will have a bearing on it. If in fact it doesn’t pass, it will almost force us to shift” to other revenue sources, Adams said, noting income tax is more volatile than sales or property taxes.
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Still, the Senate leader said, “regardless of whether that passes or not, I don’t think it will change a lot of our focus. We think we ought to move to a tax on consumption rather than productivity.”
Taxing consumption means relying solely on sales taxes to replace the income tax, he said. Besides increasing the state sales tax rate, there could also be an expansion of what’s taxed to include services, although that was part of the ill-fated tax reform package.
“We’ll take this incrementally, to try to find ways to be able to make that shift, I think, so people understand it. There probably will be more acceptance,” Adams said, adding that the poll is “a positive” that will “help get the word out.”
Turning to property tax, though, is a non-starter, he said.
Replacing income taxes with state property taxes “hasn’t come up. Nobody’s talked about it. That would be very difficult to do. As far as I’m concerned, that’s off the table,” Adams said, citing the effect of property tax increases on seniors and others.
Property tax “is the most stable tax. It’s predictable, it’s stable. A lot of government entities like it,” he said. “But it’s not a good tax in my opinion.”
