Day 43 — Our Students Now

Several bills were considered in the last week of the session that were a result of a compromise between the proponents of the Our Schools Now initiative and legislative leadership.  I was the sponsor on two of these bills, HJR 20, Joint Resolution Submitting a Question to Voters and HB 491, Election Law Changes.  HB 293, Tax Rebalancing Revisions was also an important part of this package of bills addressing tax reform and the impact on education funding, transportation funding, and the rebalancing of state taxes.  The impact of each of these bills is outlined below the media links here:

 

HJR 20 directs the Lt. Governor to place a question on the ballot that would ask voters if the state should increase the gas tax by the equivalent of 10 cents per gallon, indexed for inflation.

If the ballot question eventually results in a 10-cents per gallon gas tax increase, the typical family of four, making $60,000 a year, driving 12,000 miles per year in a vehicle that gets 25 miles per gallon would pay an additional $48 per year.

Combined (HB 293 and HJR 20), the state income, property and gas tax changes would be an increase of about $42 per year for a typical family of four, compared with several hundred dollars per year under the Our Schools Now proposal.

The combined state and federal tax changes from federal tax reform save a typical family about $1,500 per year; when combined with our state tax changes, that amounts to about $1,450 per year.

HB 293, Tax Rebalancing Revisions:

1.      Reduces the state income tax rate from 5% to 4.95% (-$53M).

2.      Expands mandatory single sales factor apportionment to make Utah more competitive for business ($0 this year, -$28M in FY 2022).

3.      Freezes the basic property tax levy for five years and uses new revenue to equalize other education property taxes (+$36M).

4.      Indexes the basic levy to legislated changes in the weighted pupil unit value and places new revenue into the Teacher and Student Success Account (+$19M).

5.      Expands the “circuit breaker” property tax credit for low income homeowners (-$180,000).

    • Because of the phase-in of single sales factor, increases total revenue by $1.6 million in FY 2019 and $21.6 million in FY 2020.
    • Lowers income tax revenue by $53.1 million and increases property tax revenue by $54.7 million in FY 2019.
    • (The fiscal note shows $103 million and $123 million because of a $101 million transfer from the Education Fund to new accounts created in the bill. That transfer is just an accounting function and is offset in the expenditure section.)
    • Increases funding for education by $55 million, $37 million of which is used for equalization of local property taxes and $18 million of which goes to Basic School Program (after accounting for the transfer shown in the fiscal note).
    • For a typical Utah family of four with a $60,000 income and a $250,000 house, the income tax rate reduction in this bill saves about $29 in 2019. The property tax changes cost about $23 in 2019, for a net savings of $6.
    • Individuals and families who qualify for the homeowner’s credit (the “circuit breaker”) could claim an additional credit of $14 per year in FY 2019.
    • The circuit breaker, income tax changes and education fund spending combined in this bill cost our state budget $84.4 million ongoing, offset by $31.1 million one-time.
    • These income tax changes and increased education fund spending are paid for using the new revenue the state will receive as a result of federal tax reform *$80 million in FY 2019, $85 million in FY 2020).
    • Shifting from the highly volatile income tax to the more stable property tax will benefit public education going forward.
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