Utah Governor Spencer Cox unveiled his $28.4 billion budget proposal last week, which includes calling for $1 billion in tax relief primarily through one-time deductions. property taxes and rebates.

Then, on Tuesday, Utah’s executive committee agreed to allocate $545 million for tax cuts. They approved $400 million in future cuts while extending the elementary school tax exemption, worth $145 million.

It could be just the beginning of the 2023 legislative session, which begins on January 17. Rep. Steve Eliason, R-Sandy, who was recently appointed chairman of the Utah Revenue and Taxation Committee, said the tax is safe. is one of the important topics of discussion that took place in the Utah Capitol ahead of the upcoming session, especially after Utah reported another large budget surplus.

“We know we’re going to have a lot of bills and we’re going to have a three-legged stool, in terms of different policy ideas,” he said during a Wednesday talk on tax policy at the University of Utah. Kem C. Gardner Policy Institute. “I think it’s always a better climate to talk about how we’re going to go, and where we’re going to cut taxes, as opposed to, ‘oh, we need to raise taxes to fill the budget deficit,’ which the government wants other. of.”

Sen. Luz Escamilla, D-Salt Lake City, said there is a lot of bipartisan “synergy” on the topics going into the session, especially on the issue of justice. The deputy wants to ensure that there is a good balance between the benefits provided by the property tax and its burden on the residents, he said.

That is, it is unlikely that there will be any significant changes in the upcoming session.

Utah Property Tax Refund

The round table ceremony held by the institution on Wednesday aimed to provide the legislator with the situation before the hearing. The next report focused heavily on the estate tax, which U.S. policymakers see as a major issue in 2023 — though it may be a one-time effort.

Utah collects taxes in several ways, including income, excise, corporate income, sales and use, motor vehicle and fuel, and excise taxes. These account for about 90% of the government’s revenue. The state’s property tax rate is relatively low compared to other parts of the country, according to the Tax Foundation, the nation’s largest tax policy think tank. . However, Cox argued last week that the one-time benefit could help reduce “stress on families” amid rising inflation.

The government collects taxes on houses, businesses, cars and even vacant land. These taxes are considered one of the more reliable sources of income, and the government can almost put its guard on them.

That’s because property tax rates are generally adjusted to control rising values, so property tax payments stay the same each year, unless some businesses – such as municipalities – offer a boost through the state’s accuracy in the tax process, said Phil Dean, chief economist at the Gardner Policy Institute.

The institute analyzed income growth over the past 50 years and found that a 2.81% increase in property taxes from 1972 to 2022 was higher than the increase of 1.58% in the growth of cars and fuel. Personal income tax saw the highest increase, at 5.17%.

This graph shows the growth in Utah tax revenue adjusted for inflation, from 1972 to 2022. Property taxes, in green , has grown steadily over the past 50 years but has some of the lowest volatility among tax sources.

This graph shows the growth in Utah tax revenue adjusted for inflation, from 1972 to 2022. Property taxes, in green , has grown steadily over the past 50 years but has some of the lowest volatility among tax sources.

University of Utah Kem C. Gardner Policy Institute

Tax revenues at a higher growth rate than property taxes can be erratic, however, jumping up and down throughout the year. So, even if those earnings are strong now, they may not be next year, or the year after that.

“Income taxes give you strong growth but carry with that strong growth,” Dean said. “So when things are going well, they’re doing well on income taxes. When the economy isn’t doing well, we’re seeing bigger cuts…

Although established over the past 50 years, little has changed in the collection of property taxes and the methods by which these taxes are collected. For example, real estate taxes accounted for 52% of all tax collections in 2021, which is a 6-point increase from a decade ago – and double the rate from last year. 1955. The federally assessed corporate property tax, on the other hand, fell to 7% last year, from nearly a third in 1955, according to the report.

Dean explained that much of this is due to the changing economy.

Mining and railroads, which were among the largest companies valued in 1955, do not dominate the business sector as they once did. Emerging technology sectors, on the other hand, are often subject to local valuations.

Utah’s housing stock continues to rise at the same time to meet the state’s growth, which causes a shift in the collection.

Where does the property tax money go?

There are guidelines in the state constitution that mandate the use of property taxes. So, of the $4.5 billion in property taxes collected in 2021, about 57 cents of every dollar went to schools, while the rest went to cities, towns, districts and limited districts, such as water districts, from the point of view of government institutions.

Utah is often accused of low student funding compared to other states. Dean notes that this is a result of the state’s property tax being “low” nationally.

“We’re less than half the national average in terms of property taxes for schools. We’re less than the national average – but closer, with state revenue – and lower national average with little federal revenue,” he said. “But this is at the heart of the problem of paying for public schools.”

This chart shows where the tax will go in 2021. About $2.5 billion, or 57% of revenue, went to education.

This chart shows where the tax will go in 2021. About $2.5 billion, or 57% of revenue, went to education.

University of Utah Kem C. Gardner Policy Institute

Of course, because local governments can adjust property taxes and Utah’s population varies, per-pupil costs can vary by school district. This led to the creation of the Utah Minimum School Program decades ago, which helps to solve the problem.

The report says most of the $5.9 billion in the program through fiscal year 2022 came from other government funds — mostly from income taxes — but also from property taxes and mortgage payments.

Are tax changes coming in 2023?

Sen. Dan McCay, R-Riverton, said Wednesday that the Legislature is looking at state tax reform while looking for ways to “maintain some predictability” related to property taxes. With better transparency, innovation and personal goals are part of all the changes.

Most of the changes have come locally in recent years. More than 100 tax companies passed the truth in the tax process this year, the most in at least a decade, according to the report. Institute officials explain that many districts, cities, counties and water districts have increased rates due to increased costs, including inflation.

These can be scary when the salary is the same every year.

“Personally, I’ve seen my taxes increase … over $750, which is a big difference for a lot of people,” McCay said. “I’m lucky … but everyone who lives on a fixed income or has other difficulties trying – or already working – two jobs, it’s hard to meet.”

Escamilla said some families are forced to take out personal loans for these types of upgrades. There are tax relief programs, but the U. reports that only about 12,500 households in Utah have received those benefits, about one-fifth of all households eligible for the program. state.

However, legislators believe that there may not be a major reform of the system due to the taxes provided by the houses and their reliability for all concerned. In general, cutting property taxes can be as difficult as raising them.

The next meeting may well focus on cleaning up some details. Eliason said some theories to change the system, such as potentially raising rates for multiple homeowners or people who don’t live in Utah, would require changes to the Utah Constitution. He added that the one-time reduction in 2023 would give more time to reassess the system in the future.

“Although we are looking for changes, we are not thinking of completely reversing the property tax,” he said.

Escamilla also acknowledges that the property tax is a “complex subject” but is designed to fund what Utahns want to see as well. He argues that education is a priority for many Utahns, so most of the dollars they spend go where they want them to go.

Ultimately, whatever happens, Dean said he hopes the report will help drive any change.

“I hope the legislature will make a good decision,” he said.

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