Over the past year Utah legislators and Governor Herbert have provided multiple excuses for adopting radical and risky tax reform measures in our state. Each of these excuses have been debunked as incorrect or greatly exaggerated. (See “Debunked Myths of Tax Reform“) The last excuse being advanced is the claim that the Tax Reform Bill will reduce Utah taxes by $160M over the next two fiscal years. This, like all of the other excuses, is a myth.
The Tax Reform Bill is not a tax cut. Base on analysis by Utah Legislative Watch, if allowed to stand, the tax reform bill will increase the tax burden on Utahans by $330 million dollars during fiscal years 2020 and 2021. ULW’s research found that, in order to arrive at the claimed $160M tax saving figure, the Legislature has grossly underestimated the effect of new taxes and grossly overestimated, or misstated, the claimed income tax savings.
The most obvious error in the accounting is that it counts, as a tax cut, adjustments to our state income tax codes that are two years overdue.
You may remember that the federal government passed sweeping tax reform in 2018. Among other things, the new federal law eliminated personal exemptions. Utah lawmakers failed to adjust for the federal changes, effectively raising Utah income taxes by $120M in 2018. The legislature failed to act again in 2019, costing Utahans at least another $120M in increased income taxes. The Tax Reform Bill finally makes the adjustments (effective for 2020) that are two years overdue. Incredibly, however, the Legislature and our Governor are claiming that this long overdue correction is a $132M tax cut.
Let’s do the math:
2018 Increase due to Inaction: $120M
2019 Increase due to Inaction: $120M
2020 Increase if no Action: $132M
Action finally taken: ($132M)
Total Effect $240M – (OVER-TAX SINCE 2018)
The claimed $160M tax cut is nothing more than a shell game. By not honestly reflecting the effect of legislative inaction since 2018, our lawmakers and Governor have re-branded a $240M income tax increase into a claimed $132M tax cut. This single adjustment, alone, debunks any claim that the Tax Reform Bill is a tax cut. The Tax Reform Bill is radical, risky, and unneeded. Contrary to claims made by the Legislature and our Governor, it is also a massive tax increase. Utah deserves better.