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Cannon’s Canon Shout It From the Rooftops: There is Plenty Of Room For An Income Tax Cut

While lots of ink has been used to opine on the ongoing tax modernization debate, a significant piece of data has gone fairly unnoticed. On a regular basis there is a report issued by the State of Utah GOMB (Governor’s Office of Management and Budget) and LFA (Office of the Legislative Fiscal Analyst) known as the TC-23. It’s a report that discloses the various incoming tax collections for the state and it provides a bit of a “live” look at how collections into the State coffers are going. For tax nerds like us it’s like getting an update on the score of the game for your favorite team.

The April 2019 TC-23 report had some nice news for those that might be paying attention. Before I get to that however, I wanted to give a little background. As the legislative session got started in 2019, the Governor’s budget called for a tax cut of $200 million. In his opening session remarks Speaker Wilson suggested a larger cut of $225 million. Both should be commended for showing bold leadership in continuing to drive Utah’s rock solid economic top spot in the nation. An income tax cut is exactly what is needed whether Utah engages in tax reform or not.

Then, surprisingly, the capacity for tax cuts disappeared as the state’s economists presented their “Winter Revenue Update” February 22, 2019 in an Executive Appropriations Committee. Revenue forecast was down by $222 million and calls for a tax cut immediately seemed to take a back seat in legislative budget work. In spite of the lower projections and to the Legislature’s credit, they did at least set aside $75 million in the budget for a tax cut in the near future.

Now for the good news. In the April 2019 TC-23 report, the state disclosed that in recent months the trend has turned positive once again and Income Tax collections are clocking at 9% above the previous year at over $4.2 billion for the fiscal year so far. That is several hundred million above the mid range of forecasts. That might not be a surprise to some considering the upside surprise nationally in the past quarter with a GDP number of 3.2%, well above forecasts.

There’s still hope for a $225 million income tax cut. Take the $75 million set aside in the budget, add what should be at least a $75 million surplus in fiscal year 2020, and another $75 million from a reasonably projected $400 million in growth the state will see in fiscal year 2021, and you get a $225 million income tax cut that could be done this next legislative session.

Shout it from the rooftops folks. It’s time for an income tax cut.

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