H.B. 210 Tax Penalties Amendments: transcript

Um, uh, Mr. Chair and committee members, I'm really excited about this bill. Um, for a number of months, actually, for a few years I've been working with the Utah Marriage Commission with, uh, multiple groups. And in fact, the Utah Marriage Commission asked the Chem c Gardner Institute to have a study on marriage penalties, um, in our tax code. And that that was finished last year, given to not just the marriage commission, but also to the general public in identifying where the multiple places, both in our federal code as well as our state code, of where the marriage penalties lie. And a, a simple description of that is, um, there are 72 federal welfare programs that are, that people are eligible to apply to. Where did these come from? In 1951, right after World War ii, the designation of Head of Household was given. In 1964, president Lynndyl b Johnson declared War on Poverty and created multiple Wales welfare programs for the country and thinking that that would eliminate poverty. And actually, they, there is a direct connection, uh, with the amount of welfare programs, with the number of poverty going up. So I've worked closely with the national, uh, the Heritage Foundation, um, which has studied this extensively, both across the states and also in, uh, in the federal tax code. And, uh, interestingly enough, the father of TANF who created that in the nineties, Robert Rector, also helped, um, to give us some insight as to what really exists in, in fraudulent, um, uh, accounts of people living in the same household. One, getting ahead of household status and the other, getting, uh, multiple, uh, numbers of some of the 76 welfare programs. And they can include everything from chips, snap, um, the, uh, breakfast, lunch, that's, those are just some examples of, of some of those programs. And so if an individual decides to, um, marry, what happens is one of those individuals that was ha receiving all the benefits, um, if the income between the two of them now goes, uh, is, is raised, they lose all of those federal benefits. Well, we cannot in Utah control the federal government. And so actually, Congressman Blake Moore tried to make these changes in the big beautiful bill, and it wasn't quite ready. He was, he was forced to pull it out. But, um, in talking with him, he said, if you talk and implement an example of how to equalize the taxpayers and and eliminate a marriage penalty, he can take our example to the federal government and with the, with support from groups like the Heritage Foundation, uh, go back to Congress and say, look what Utah's done. So what does this do? Um, I'm actually gonna turn to the second page of the handout. And perhaps, uh, I dunno if you have access to show, uh, the material, uh, that I've included. This is, um, the, there's three pages of this handout, and I'm gonna look at the second one, um, as we pull it up. And, um, right now there are the following filers. You can be single, you can be a head of household, means you're single with children. Uh, you can be married, but filing separately. Um, or you can be married in filing jointly. So this, maybe I'll just wait for a second to see if we can pull it up. It'll make more sense if we're looking at it together. Yeah, we're gonna get It up right now. So while we're waiting, I, I happen to mention, uh, the details of this bill with a colleague who said they have a relative who fits in in this category of double-dipping. Um, they, this is a 40 something year old individual who was divorced and is now living with another individual who has many of these welfare programs. And so one is getting the, they're paying their taxes and has a great income, and the other one is not claiming that they're married. And so they're getting all these welfare programs. And the response was, but if we get married, we're gonna lose all of that. So if you look at this, um, these are four different taxes that we have in Utah, the tax payer tax credit that is controlled by Utah Funds, social Security tax credit, retirement tax credit, child tax credit. And if you can see, there's multiple thresholds and phase out. So what this proposes is, if you are single, if you're single with kids or you're married and filed separately, you have the same proposed threshold. If you are married and filing jointly, then it's just double 'cause it's two people. So it puts everybody on a play on the equal playing field. And what that gives us the opportunity to do is as, uh, as we, as legislators consider what to do with a, to how to support, whether they're individuals or married or living together, whatever it is, who's actually raising the children. And that's where the, the, we can boost the child tax credit, whether you're single or filing together or filing separately, it's who is raising the children, regardless of the definition of, of what your, your, um, married status is. So that's where we get that opportunity. So the phase outs are all equal and double if you're filing jointly. Now, if you turn to the, the next page of the handout, um, all of the items in red indicate a marriage penalty. So that means if you are in one of those categories, which are primarily if you're single or head of household, if you get married, that is the difference of where you are penalized in our tax code. So HB two ten second sub, if you look at the dark purple maroon, depending on what your eye color is, um, they are all equal across the board. And the married, um, filing jointly, which is the last of each of these credits, is exactly double. So this does a few things. Number one, it puts everybody on an equal playing field. And if you ask I, well, I have six kids, and they're the ages of 22 to 32. And if you ask them, um, you know, which of you is more important to have a head of household status, they're like, we both work. Why are you trying to choose which one's more important than the other? Or if you talk to them about, um, the complication that it is to figure out who's married, who's not, who's living together, who's getting whatever. Um, this eliminates that conversation. It puts everyone on equal playing field. And in fact, this legislation has a, it's revenue neutral for the most part, but it actually has a little bit starting next year, it actually has some inco, some, um, revenue positive, which means we could come back next year and determine, or this year, if we wanted to do things with the child tax credit this year, we could use some of that positive revenue to boost those who really have children and who are trying to raise a family regardless of their marital status. Right? So this bill, HB two 10, number one, simplifies the tax code. So we don't have lots of thresholds. Um, it eliminates the marriage penalty and it provides the opportunity for us to really focus our funds where we want for those families who are trying to raise children. Um, one of the things that is, uh, really important is it is it was found in the Chem C Gardner Institute and also in, I've got, I've got a big folder full of what is the success sequence that this legislative body has invested in to help individuals to get out of poverty. Um, it has been shown that if you do the following, if you graduate from high school, if you have a full-time job and you get married before you have a child, you are, you have a 95% chance of never being in poverty. So how does that relate to this? I think the statistics, um, across the board that speak to that, getting outta poverty, really support, um, what can we do to bring stronger relationships, unite families, um, have the support for those who are raising children to help our neighbors, friends, family to get outta poverty, stay outta poverty, and most importantly, have the a a two parent household when it, when they can. And so I, I again wanna thank, um, the Heritage Foundation and, and Congressman Blake Moore. Um, I really sat down with extensively with groups like the Sutherland Institute, the, um, Utah Tax Commission, because this is something that is long overdue and we have the opportunity with this legislative session to create an, an equal playing field, and then, um, determine how our other tax credits or tax cuts can continue to help keep money in the pockets of our, of our neighbors. That concludes my presentation.

Yeah. Thank you. Uh, appreciate that. So appreciate the presentation. And, uh, uh, I just, I, I like trying to simplify this and make it right. I just had a question about, uh, so the single families, single parent families with children, it, it, it, uh, pulls it down quite a bit on what they're getting. Uh, is there, are there some backups for them or is there a transition period or anything like that? Or,

So just as a perspective, the most that that is affected is $150 a year. And that does not include the effect that we are proposing this year and have proposed, you know, in the, like we have in the past for income tax cuts, um, or boosting the child tax credit, the maximum that is, that's, as it's been evaluated is $150. Okay. So that's why I really tried to figure out how can we become revenue neutral? How can we have an equal playing field, and what is the, the least amount of impact to have on any of these categories? And so that's where this came from. Um, and that is in, in one of the thresholds, the most, the rest of them either. Um, right now, any people who are married are the ones paying a lot more than everyone else. So that's why when you have an opportunity to say, Hey, you know what, let's get married. Um, and in the lower tax brackets especially, they're the ones that are hit with more of a tax burden because we say, Hey, guess what? You're now married, we're gonna have you pay more than just what it would be if the two of you were, were joining what you have. So this discourages those who say, I'm not gonna get married 'cause it's gonna ruin my ability to get some tax incentives. And the only difference is $150.

Okay, thank You. Yeah.

Yeah, nice, uh, presentation. I, I think you ought just call it the marriage penalty. That, and that's what it is. And that's why the, the title of this bill is ta Well, tax Penalties Amendments, but it really is the, the marriage penalty is what it's addressing. I think you're hitting a good note here.

Time's yours. Good afternoon, members of the committee, Nick Dunn with Sutherland Institute, appreciate your time. Sutherland Institute is currently neutral on this bill, this version, but I wanna offer a few comments to help give some context. There are some things in this bill that I think accomplish positive policy objectives and some things that we have some questions about that we would like to, to maybe encourage some additional conversation on the positive side, neutralizing marriage penalties by essentially ensuring that when a taxpayer goes from unmarried to married, they do not see an additional tax burden, accomplishes a sound policy objective. There's ample evidence of the societal benefit of marriage, and we wanna make sure that public policy never dissuades or discourages or penalizes folks who choose to get married. That aspect of it is, is strong. The, the aspect of it that we would have some questions or concerns about are the effect to the single parent households. The, the tax credits by lowering the threshold amounts for the phase outs, for the, all of the head of household filers and the four credits, and the, the single filers and three of those credits would amount to, as has been discuss, discussed an effective tax increase for those households. That's something that we would love to see work through more, seeing more data on the impact to those demographics and seeing if there's a way to, ideally in the perfect world, accomplish the objective of eliminating marriage penalties in such a way that there is not any additional tax burden placed on, say, head, head of household filers, which tend to be low to moderate income single parents. So that's just some perspective for the bill. We're very grateful to the sponsor. Again, there, there's some good things in here. There's some things that we would suggest deserve additional attention, and the sponsor's been tremendous and gracious to work together and hear comments and concerns and questions from us, and hopefully we can arrive at a good conclusion. Thank you.

Hello. Committee members, Elizabeth Garvey, vice President of Public Policy for United Way of Salt Lake. And I'm actually really here to echo, um, what, uh, Nick Dun just said. Um, we fully appreciate this bill and that it does, um, address the issue of marriage penalties in, um, taxation. Uh, but we don't think that that should happen at the, uh, sorry. I'm totally thank you. Thank you. At the expense of, um, people who are single and not married at this time. So, um, we would urge that piece to be worked out, um, because there, there are some really important pieces in this bill. Thank you.

Uh, thank you, Mr. Chairman. Commissioner John Valentine, chairman of the Utah State Tax Commission. Uh, we have no administrative concerns with the second substitute of some of the earlier versions of this bill. We did have significant issues with, but we have to recognize that, uh, Representative Ballard was a very, very, a very advocate for her position, and we were able to come up with things that actually we can do and can work. In fact, many ways this is simpler than our present system. And so it's a good model to say, how do we simplify that across Manti multiple layers? This is what this does. So we are again, um, have no administrative concerns with this bill. Thank You so much.

Thanks, commissioner Valentine. Um, so two, a couple of the other comments about this possibly having some negative effects on, uh, how to household single parent families. Do you have any suggestions on how that might be addressed?

Fiscal note, Um, that's, that could increase the fiscal note if you wanted to, um, do away with that penalty. So if you wanted to fund that as part of your overall tax cut package, that would probably be the easiest way to do it. You can figure out more complicated ways, and at that point, taxpayers and the tax administrators, um, pull their hair out trying to figure out how to work the system.

Yes. Uh, if, if I could Well, you're, thank you, commissioner. Um, do you have a, if we were to fund that, do you have a ballpark figure of what that would be?

I do not at this time. Okay. Thank you.

My name is Eric Smith here on behalf of myself, Jacob Oaks and Liberty United. And you're welcome to sign after you're done with your comments, it'll be fine. Okay. Just gimme a moment here. What I, we, what we're asking is to strike section six. And the reason why is, if the goal of this bill is eliminating marriage penalties, repealing the earned income tax credit works against that goal. The earned income tax credit stabilizes working families with children during income shock years. Striking the repeal keeps a bill aligned with its slated purpose without expanding government. And that's what we would ask is for the line six to be struck. Thank you.

Uh, thank you. I move that we adopt the second sub to HB two 10.

I'll waive Okay.

Yes. So does the second sub remove the, the section on?

Not an issue. Thank You. That's good to have on record.

Yeah, I think that's a really important question because, um, without doing that, it is a very simple policy and then we can figure out where with other tax credits or income tax that we're discussing this year, we could compensate for that. Um, so I'm, I'm willing to entertain it. I think if it was solely in here, um, it would be a separate fiscal priority. And I, I, I love the idea, but I'm willing to entertain it. So in other words, yeah. Sure.

Yeah, I move that we pass out second sub to 10 tax penalty amendments with favorable favorable recommendation.

Uh, no, I think, I think we've got a good discussion.

Yes. And I also wanna mention all of the federal benefits are going to stay the same. So anybody receiving EITC from the federal government or benefits from the federal government, this does not alter all of those benefits that they cont that they currently get. This is just the Utah portion of, of the taxes that it's affecting.

I would like to just say I favor this bill. I think this is fantastic. I think this is an area that has been needing some attention for a long, long time. I do see the, the challenge there and, and what Representative Eliason did mention, but, uh, there has been a significant, um, I've seen numbers pretty high in this, uh, for some families that is kind of the marriage penalty aspect. And so I think this is great policy. I'm okay personally, and we can discuss that other too. I'm okay personally moving this through if it, if it means getting it on the, the books and, and we work out the fiscal note later, maybe in another subsequent year. But that's just my own personal opinion. But, um, but thank you for bringing this, uh, forward.

Uh, yes. Motion to circle

like to speak to it. Yes, I've got a substitute, uh, that everybody's gonna love. So we're gonna circle it for right now.

Thank you Mr. Speaker. Motion to encircle HB two 10.

Yes. There is a fourth substitute that, um, everybody's gonna love. And then I'll speak to that when we discuss the bill.

Thank you, Mr. Speaker. Um, uh, in this modern day age, we have in Utah a great tax policy for, we have a flat income tax, we have a flat corporate tax, but as far as our tax credits, the levels for, uh, for who you are depend on what your status is. And so in talking to my kids, actually, they were the ones that said, mom, relationships are fluid. And so what can we do to make taxes simpler and not have government defined relationships? So I'll tell you the difference between the sub and

a quick co couple things. Yes, yes. Uh, we need, before we speak to it, we have to make the motion to, uh, adopt the four sub, but there's also not a fiscal note, uh, on the four sub either. Do you have this?

I was told I didn't need one. 'cause it's still a positive fiscal note. I

Think there still needs to be a fiscal note to describe where the shift is going inside the taxes. So, um,

That's what staff told me. Well, the fiscal impact would be the same. The fiscal impact on, just for, to be clear, the fiscal impact on the, uh, fiscal note is the same for the four substitute and the current fiscal note online. So if you have questions,

you're saying the fiscal note's the exact same, The fiscal note is not exactly the same.

It will still be revenue neutral or a little bit positive, but just spread out over five years. So it will have a different one. But it, I, I was, staff told me I it would be fine to run it, so happy to wait or whatever, whatever the speaker would like.

Sure. Yes.

So, um, in our, as I was mentioning, our income tax on our, um, our corporate tax is very flat, but our tax credits are fluctuating depending on what your status is. So the difference between the four sub and the second sub is this. Um, it, uh, the goal of both of these bills is to have an individual, whether they're single, whether they're single with kids, whether they're married, filing single, that everyone's created the same, instead of the government wondering what your status statuses, your marital and relationship status. If you are filing married jointly, then it's literally double that for married filers. So the second substitute would take place immediately. The difference between the second sub and the fourth sub is the fourth sub. Make sure to, um, have thresholds gradually taper. There would never be anything more than a $30 change for any individual or joint filer to help our tax code to, uh, be, uh, a flat tax credit, um, for every individual or double if there's two people. So, uh, that's the difference between the second and the fourth sub is it accomplishes the same goal, it just doesn't have any impact more than $30, uh, for any individual filer regarding Utah Tax at any given time.

Thank you, Mr. Speaker. Uh, just make a motion to circle so we could just wait on that fiscal note. Okay.

while waiting for the fiscal note. That'd be just fine. Thank you.

Yes. There is a fourth substitute that, um, everybody's gonna love. And then I'll speak to that when we discuss the bill.

Thank you, Mr. Speaker. Um, uh, in this modern day age, we have in Utah a great tax policy for, we have a flat income tax, we have a flat corporate tax, but as far as our tax credits, the levels for, uh, for who you are depend on what your status is. And so in talking to my kids, actually, they were the ones that said, mom, relationships are fluid. And so what can we do to make taxes simpler and not have government defined relationships? So I'll tell you the difference between the sub and

So, um, That's what staff told me.

Sure. Yes. So, um, in our, as I was mentioning, our income tax on our, um, our corporate tax is very flat, but our tax credits are fluctuating depending on what your status is. So the difference between the four sub and the second sub is this. Um, it, uh, the goal of both of these bills is to have an individual, whether they're single, whether they're single with kids, whether they're married, filing single, that everyone's created the same, instead of the government wondering what your status statuses, your marital and relationship status. If you are filing married jointly, then it's literally double that for married filers. So the second substitute would take place immediately. The difference between the second sub and the fourth sub is the fourth sub. Make sure to, um, have thresholds gradually taper. There would never be anything more than a $30 change for any individual or joint filer to help our tax code to, uh, be, uh, a flat tax credit, um, for every individual or double if there's two people. So, uh, that's the difference between the second and the fourth sub is it accomplishes the same goal, it just doesn't have any impact more than $30, uh, for any individual filer regarding Utah Tax at any given time. Thank you, Representative Ballard.

That'd be just fine. Thank you.

Thank you Mr. Speaker. Motion to encircle HB 4 45.

Um, yes. Motion to adopt fifth substitute.

I would. It does, uh, uh, three things. One of 'em is eliminate the social security portion that was in the previous, um, uh, substitutes. It also makes sure that there's nothing more than a $30 increment, uh, for anyone. And the, the fiscal note is pretty darn good.

Thank you Mr. Speaker. This bill does, uh, three things. The first one is it creates a flat structure for our, uh, tax credits. In Utah. We have a flat income tax. We have a flat corporate tax, and we have four income, uh, tax credits in our system. Uh, this includes three of those four, the taxpayer tax credit, retirement tax credit, and also the child tax credit. And what I mean by flat is that regardless of an individual's relationship status, um, whether they are cohabitating, married, divorced, single, separated, whatever that may be, that the government is out of the relationship business. And those individuals, all of us who are looking and needing those tax credits actually will know year to year what our, uh, tax credit will be regardless of the relationship. So I think this is really important because it means we know what's in our wallet, we know what we need to give for taxes, we know what we're gonna get back in tax credits, and that consistency is, is very valuable. It's really interesting how we figured out this fiscal note 'cause it is barely positive. So it is a very neutral bill to be able to accomplish this. Um, the most that it would impact is 4,800 individuals for $66 the first year and the second year, uh, $25. So I think this is really good to be able to have government get out of our relationship status and business and be able to have consistency for our wallets, for what we pay in taxes and also what we get back in our tax credits. And you also received a, a great, um, new letter from the Sutherland Institute that was passed out on Friday, uh, stating their support for, for this policy.

Thank you Mr. Speaker. Like I said, this is really great policy for knowing what's in our wallet for our flat income tax, flat corporate tax, and now consistent tax credits regardless of what our relationships are. Thank you, Mr. Speaker.

Thank you Mr. Speaker. Motion to encircle HB 4 0 8.

I would. It does, uh, uh, three things. One of 'em is eliminate the social security portion that was in the previous, um, uh, substitutes. It also makes sure that there's nothing more than a $30 increment, uh, for anyone. And the, the fiscal note is pretty darn good.

Thank you Mr. Speaker. This bill does, uh, three things. The first one is it creates a flat structure for our, uh, tax credits. In Utah. We have a flat income tax. We have a flat corporate tax, and we have four income, uh, tax credits in our system. Uh, this includes three of those four, the taxpayer tax credit, retirement tax credit, and also the child tax credit. And what I mean by flat is that regardless of an individual's relationship status, um, whether they are cohabitating, married, divorced, single, separated, whatever that may be, that the government is out of the relationship business. And those individuals, all of us who are looking and needing those tax credits actually will know year to year what our, uh, tax credit will be regardless of the relationship. So I think this is really important because it means we know what's in our wallet, we know what we need to give for taxes, we know what we're gonna get back in tax credits, and that consistency is, is very valuable. It's really interesting how we figured out this fiscal note 'cause it is barely positive. So it is a very neutral bill to be able to accomplish this. Um, the most that it would impact is 4,800 individuals for $66 the first year and the second year, uh, $25. So I think this is really good to be able to have government get out of our relationship status and business and be able to have consistency for our wallets, for what we pay in taxes and also what we get back in our tax credits. And you also received a, a great, um, new letter from the Sutherland Institute that was passed out on Friday, uh, stating their support for, for this policy.

Thank you Mr. Speaker. Like I said, this is really great policy for knowing what's in our wallet for our flat income tax, flat corporate tax, and now consistent tax credits regardless of what our relationships are. Thank you, Mr. Speaker.