August 2017 Interim Session Update: “The Future of Utah’s Income Tax”

Income Tax Working Group, Utah Tax Review Commission: August 2017

You can always count on Senator Dabakis to make even the most mundane meetings exciting. During Utah Tax Review Commission’s meeting on Utah income tax system, Senator Dabakis made sure to ask tough questions and push-back when he saw potential inequity in the tax code. He repeatedly stated the “big picture” idea of increasing equity within Utah’s personal income tax. Specifically, he wants to make sure that changes to the tax code do not hurt low-income and middle-income individuals. He is pushing for a progressive tax rate and hopes to see progress in the future.

Senator Dabakis is not the only one in favor of a progressive tax rate. Indeed, most of the commission agrees that a progressive tax (based on income brackets) is more equitable than a flat tax rate (a standard tax rate regardless of income). However, they do differ in their opinions about the best way to reach the best tax rates. The meeting was largely an overview of the current system and ended with each member of the commission stating their preferred priority changes for the tax code. We can expect the next meeting to discuss the following topics:

 

  1. Balance simplicity and equity: Troy Lewis (BYU Professor and CPA) believes that progressive tax rates are more equitable but typically more complicated, leading to a convoluted tax code impossible for a layman to understand.
  2. Personal estimated taxes: Curtis Trader (CPA) stated that not requiring payment of estimated taxes leads to greater inequity. He used an example of a secretary with a $40k salary having to pay monthly taxes while the executive with a one million dollar salary only has to pay in April. He believes this can lead to huge inequity between income brackets.
  3. Monitor Tax Gap: In the past years, more and more people (44 million, actually) have a side hustle — or a side job to bring in extra cash. This extra money is hard to monitor, so it is extremely difficult to collect taxes on that income. Troy Lewis thinks this is a mixed opportunity for revenue, and he wants Utah to find a way to tax that ‘side hustle’ money.
  4. Big Picture: Again, Senator Dabakis really wants the tax commission to be cognizant of the big picture. He is extremely worried about the increasing income inequality in our society. Citing concerns of huge social strife, Senator Dabakis wants to make sure the tax code does not undermine lower-income or middle-income individuals and hopes those making the tax code will remember the growing inequity.

– Laura Boyer, Karen Shepherd Policy and Advocacy Fellow

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