Heading into the Utah Legislature’s 2025 legislative session set to convene next week, Gov. Spencer Cox and Republican legislative leaders are eager to cut taxes for a fifth year in a row, adding to their running total of more than $1.2 billion in tax cuts since 2021.

But even as they continue to chip away at the state’s income tax base — saying they eventually want to see Utah get rid of its income tax entirely — a weighty policy issue continues to loom unaddressed.

Tax reform.

Cox acknowledged it Tuesday during an annual conference hosted by the Utah Taxpayers Association, a tax watchdog group, at the Little America Hotel in Salt Lake City. He repeated a warning he issued last year, when lawmakers were gearing up for their fourth tax cut — that if they’re going to continue to cut the state’s income tax rate with the ultimate goal of eliminating the tax altogether, they need to at some point have a larger discussion to overhaul Utah’s tax system. 

“Look, I said this last year and I will just say it again. We’ve got to get really serious about what our tax code looks like moving forward,” Cox said. “I feel like we’re kind of piecemealing it along, and I don’t think that’s a great way to do things.”

Utah Legislature poised to cut taxes for 5th year in a row — but how?

Cox, who this month began his second term as Utah’s governor, reiterated his call for Utah lawmakers to tackle tax reform in response to a question from an audience member about any future tax policy priorities his administration may have for his next four years. Cox has promised 2028 will be his last year as governor, saying he will not seek a third term.

Cox has, however, supported and signed all of the Legislature’s recent income tax cuts — and he said he would support another one if that’s what lawmakers opt to do. 

While Cox this year is pushing to totally repeal the state’s Social Security income tax (which he reiterated is a form of an income tax cut), he said he would also support an income tax rate cut. Or both, if lawmakers find the money.

“If we can fit it in the budget, and we’ll look at what those final numbers are, I would be willing to support that,” Cox said. 

But expecting a tighter budget year thanks to lower than expected revenue estimates for 2025, legislative leaders at the helm of Utah’s Republican-controlled Legislature have both signaled they have their own preferences. House Speaker Mike Schultz and Senate President Stuart Adams said they’re inclined to support another income tax rate cut and maybe a scaled-back version of Cox’s Social Security proposal, by expanding the number of Utah taxpayers eligible for the Social Security benefit tax credit rather than eliminating the tax entirely.

Cox acknowledged that lawmakers can choose to disregard his budget recommendation — but he defended his proposal to eliminate the state’s tax on Social Security benefits, saying, “I handed you a gift this year.” 

“This is, I would say, easily the most popular proposal that I’ve made in the past four years judging by the interaction that we’ve had,” Cox said, jokingly adding, “I also lament what will happen to you if you don’t do it, so good luck with that.” 

Cox reminds tax reform is still needed 

Even though legislative leaders have said they don’t expect a broad tax reform discussion during the 2025 session, Cox said that’s something lawmakers will need to confront at some point.  

“Are we going to eventually eliminate income tax? I said I would support that,” the governor said. “But we have to look at what that looks like.” 

Though it may initially sound like an appealing prospect for Utah taxpayers, Cox pointed to states like Texas that don’t have an income tax, but rely on higher property taxes.

“I hear people all the time say, ‘I want to be like Texas.’ I’m like, ‘Great, let’s eliminate the income tax just like Texas,’” Cox said, though he urged Utahns to realize that would mean maybe tripling their current property tax bills. He said he asks, ‘Is that what you prefer?’ And they’re like, ‘Oh, well, maybe not.’”

“So I think it’s a mistake to just keep piecemealing things,” he said. “I think we have to decide … What is the optimal vision of that? And then let’s do it. … Let’s not just do five basis points here and 10 basis points there and keep doing this. Let’s do it. Let’s get real about it.”

Cox, however, didn’t offer specifics on how he’d like Utah to undertake tax reform. 

“I have some ideas,” he said, “but I’m not a tax expert.” He welcomed the Utah Taxpayers Association and others to get involved in the discussion. 

Utah State Tax Commissioner John Valentine also spoke in front of Tuesday’s conference, fielding questions from the crowd — which included a fair share of legislators. 

When one audience member asked if Utah’s “three-legged stool” for tax policy is “still solid” — referring to the three most prominent taxes supporting state government and public schools (income tax, sales tax and property tax) — Valentine indicated it’s stable for now, but could reach a tipping point sometime in the future, especially if lawmakers continue to reduce income tax revenue. 

“The governor is correct,” he said, “that at some point in time you’ll end up like Texas or like Florida where you have to rely on some other tax. And most of the time, they’ve gone to either a significant sales tax increase or a significant property tax increase — or both.” 

Valentine said Texas’ property taxes are now four times higher than Utah’s. He added that property taxes can sometimes be problematic and challenging for homeowners when their bills fluctuate unexpectedly. 

“Property taxes are particularly difficult for me,” Valentine said, adding that “property taxes are tough for people because it comes all at once. It comes as a big amount. And there’s not sometimes a reasonable relationship between the value of the property you’re in and the ability you have to pay a large property tax bill. Because the property may have increased in value, but your overall wealth and well-being and income has not.” 

So Valentine cautioned against taking that approach if lawmakers opt to eventually completely repeal the state’s income tax. 

“I don’t like the idea of trying to push it more on property taxes,” he said. “I agree with the governor on that one. That’s a little scary.” 

Why has tax reform been tabled?

Pressed by Utah News Dispatch on the governor’s call for a larger tax reform discussion and why that debate has been tabled for another year, Schultz pointed to the Legislature’s last tax reform attempt that crashed and burned.

“Because we remember what it was like a few years ago when we had that discussion,” Schultz said, prompting some knowing chuckles from the crowd. 

In 2019, the Utah Legislature passed legislation to raise sales taxes on food, gas and some other services while reducing the income tax rate from 4.95% to 4.66% — but lawmakers repealed it soon after amid backlash fueling a referendum effort that was on track to qualify for the ballot. 

The list of services that would have been taxed was whittled away repeatedly as the tax reform package wound its way through the Legislature, to the point that even some supporters said they wished it was more comprehensive by the time it came to a vote in the House and Senate. In the end, it would have taxed services including Uber rides, streaming media, dating referrals, pet boarding, towing, newspaper subscriptions, and a handful of other services, the Deseret News reported. 

Utah’s last tax reform attempt crashed and burned. What now?

While they have lowered income taxes over the past four — going on five — years and have now surpassed the income tax rate cut proposed in 2019, Utah lawmakers haven’t since taken another stab at such sweeping tax reform. 

That’s even though pundits including former Gov. Mike Leavitt have urged them to muster up the political courage to do so in order to confront an evolving economy and a budgetary structural imbalance between sales tax revenue and income tax revenue that will eventually become impossible to ignore. 

Schultz said he still stands by that 2019 effort. “What we came up with would reduce the tax burdens for the citizens of the state,” he said, but “the problem is it was so complicated the citizens of the state didn’t get it. And it was hard.”

The House speaker added “we’re not to that point yet” of needing to revisit that debate, “but you know, down the road, future legislatures will have to have that discussion.”

Schultz said for now “we don’t see anything on the horizon” to force the tax reform discussion this year, adding “we’ve got a few years before that becomes a big issue.” 

“It will have to happen,” he said. “Those discussions will have to come at some point in time. But it’s not a top priority right now … there’s other things to focus on.” 

Legislative proposals for 2025 — so far

Currently Utahns who receive Social Security are already eligible for a tax credit if their household income is no more than $75,000. While Cox wants to do away with that tax completely, some 2025 legislative proposals have surfaced to partially answer his call by simply increasing that income threshold to some other amount lawmakers settle on. 

With recently filed HB130, Rep. Walt Brooks, R-St. George, has proposed giving a partial Social Security tax cut by increasing the income threshold to $90,000 for households, $54,000 for single filers (up from $45,000) and $45,000 for married filing separately (up from $37,500).

Meanwhile, Rep. Kay Christofferson, R-Lehi, has filed a bill, HB106, to lower the income tax rate from 4.55% to 4.45%. According to State Tax Commission estimates, that would cost the state about $160 million — the entirety of the amount the Executive Appropriations Committee already set aside in December to be used for some type of tax cut. Cox’s proposed Social Security repeal would cost roughly $143 million.

Another proposal that Valentine said will be “interesting” to watch is SB85, from Sen. Lincoln Fillmore, R-South Jordan. He’s proposing that the state use a formula to automatically reduce its income tax rate when the state’s actual revenue exceeds forecasted revenue starting in 2026.

Another income tax rate cut already has some political steam, with Schultz, R-Hooper, and Adams, R-Layton, both saying Tuesday they want to cut Utah’s income tax rate for a fifth year — “again, again, again, again, and hopefully this year again,” as Adams put it. 

Schultz spent most of his speech during Tuesday’s conference talking about one of his top priorities: higher education “reform.” He has challenged leaders of Utah’s public universities to find “inefficiencies” and cut “low-performing” programs while expanding other programs like nursing, engineering and computer science to better “align” the system with workforce demands. 

On taxes, however, Schultz again said he’d be supportive of reducing Social Security taxes — but only partially — while also providing another income tax rate cut. 

“We have a limited amount of money. If we had all the money … I’d love to go all the way and take the Social Security tax completely off the table,” the House speaker said. 

But given this year’s limited revenue, Schultz said he’d like to raise the Social Security tax income thresholds “where high-income earners continue to pay Social Security taxes. However, the rest of that money I would like to take and give every citizen of the state who pays income taxes a tax cut.”  

Adams also said he’d be in favor of a partial Social Security tax cut by maybe moving the income threshold to perhaps $100,000. “But we also have young families paying income tax that need a tax break too,” he said, so “my hope is that we cut income tax for a fifth year in a row.” 

Across-the-board income tax rate cuts, however, disproportionately benefit the wealthy over low-income earners. Cox has also proposed another expansion to the state’s child tax credit for families of up to four children. That would cost the state about $2.1 million. 

“One of the No. 1 things we hear is the cost of inflation is hitting home with families, young families,” Schultz said. “Doing everything we can to continue to reduce their tax burden, I think, is every bit as important as reducing it for high-income earners.” 

Schultz said he had “no doubt that sooner or later” lawmakers will eliminate Utah’s Social Security tax completely, but he questioned whether this year, “when we don’t have a lot of revenue, is this the right year to do it?” Still, he said he’d like to “see everybody get a tax cut.” 

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House Minority Leader Angela Romero, D-Salt Lake City, said she’s supportive of the governor’s Social Security tax cut proposal, but she’s opposed to another income tax rate cut, noting it would result in hardly noticeable savings for low-income earners. 

“I’d like to see that money put in other spaces,” she said, pointing to issues in need of more funding including homeless and housing services. 

At least one Republican lawmaker, though, isn’t keen on repealing Social Security taxes. Though he acknowledged that Cox’s proposal has “a lot of wind behind” it, Sen. Dan McCay, R-Riverton, who is also chairman of the Senate Revenue and Taxation Committee, indicated he had misgivings. 

“I’ve always believed in a broader base and a lower rate,” McCay said, adding that it’s “better for the economy and better for the taxpayers and is more transparent.” 

“I’ve never been one to believe that we accomplish more by carving (out) or setting aside groups and creating special tax credits,” he said. “That’s why I’m concerned, a little bit, about the push to completely withdraw the tax on Social Security.”

McCay added that he realized it’s “potentially a very politically popular idea. I get it.” But he said “the wealth accumulation for people over the age of 65 over the last 10 years has doubled, (while) wealth accumulation for those under the age of 65 has been cut by a third.”

McCay said Utah households with incomes less than $75,000 already don’t pay taxes on Social Security benefits, while noting the median salary for Utah teachers is $67,000. 

“I have a hard time justifying a tax cut that is going to be paid for by teachers, or by other public employees,” he said. “So, while popular — because we would remove our name from the AARP website that says Utah is one of 13 states (that) collects (Social Security) taxes — sometimes it’s important to not only do popular things, but to do the right thing.

McCay said he will “double down” on lowering Utah’s income tax rate and advocating for “a broader tax base,” though he didn’t offer specifics.