Tax Equalization and Reduction Act

by admin Mar 05, 2019

Tax reform is a hot topic among Utahns – especially during the legislative session. Here are a few facts to help you be better informed.

Information provided by the Office of Legislative Research and General Counsel.

PRINCIPLES OF TAX REFORM

Broaden the sales tax base in all sectors

• Minimize tax pyramiding and avoid disruptions
• Anticipate future new economic activity
• Eliminate exemptions where practical
• Implement excise tax where sales tax expansion is not practical
• Structure implementation to: Phase-in the reduced sales tax rate to ensure
assumptions are validated, Make sales tax base expansion/rate reduction and
income tax provisions coincide as much as possible for taxpayers.
• Hold harmless provisions for local option sales taxes
• Maintain statewide local rates (1.0% + 0.25%)
• Excess revenue retained for hold harmless distribution
• Reduce local option rates proportionate to new base

OVERALL REVENUE NEUTRALITY

An expanded base is offset by decreased rates.

The General Fund’s tax base is broadened by an estimated $36 Billion
• Bring a significant number of services, including some construction inputs and professional services, into the sales tax base
• 0.075% transfer tax on all real estate transactions other than refinances generates about $18 million
• 1% premium tax on commercial medical insurance generates about $66 million
• Eliminate 15 current sales tax exemptions to generate approximately $72 million

These increases in the base are offset by:
• Sales tax rate reduction to 3.10%
• Income tax rate reduction to 4.75%
• Expanded Utah Personal Exemption for low-to-middle income Utahns
• EITC for Utahns experiencing intergenerational poverty
• Expanded retiree tax credit

At full implementation, a typical Utahn, 31 years of age, married with 1 dependent, making $65,325 per year, would have a net tax reduction $634:
• Although expanding the tax base is mostly paid directly by businesses, about a quarter may be paid by consumers (+$158)
• Lower the overall rate to 3.10% (-$416)
• Expand personal exemptions (-$294)
• Expand retirement tax credit (applies to older Utahns)
• Implement an earned income tax credit (applies to intergenerational poverty)
• Reduce income tax rate to 4.75% (-$82)
• The FINAL IMPACT WILL DEPEND ON AN INDIVIDUAL’S TAX POSITION

Comments (0)




© 2017 Sandy Area Chamber of Commerce