S.B. 116 Income Tax Rate Modifications: transcript

Senate Revenue and Taxation Committee, Jan 28, 2026

1. Committee chair (presiding)1:45:19

   Uh, you can start that one.

2. Sen. Lincoln Fillmore1:45:21

   Uh, thank you so much. Um, I have a substitute that I'd like to move if we could. Okay. Uh, like To del uh, make a motion to delete entitle and Body Senate bill one 16 and replace it with first substitute Senate bill one 16. Yeah,

3. Committee chair (presiding)1:45:34

   That'd be great. Do you wanna speak to that real quick?

4. Sen. Lincoln Fillmore1:45:36

   Uh, yes. Uh, working with the tax commission, you know, we, uh, operate in an environment where we use old data to make ongoing decisions. And, um, that calendar kind of creates something. If, so, this is a much cleaner way for the tax commission to, uh, do the analysis to publish what the new income tax rate will be based on revenue. So that, rather than based on projections and formulas, it's based on an actual dollar amount that if you have reached this amount, there's no calculation to be done. The rate goes down by one basis point. Okay. A cleaner way to implement it. Yeah, much. Uh, and less politically charged for sure. Yeah. Yep. Okay.

5. Committee chair (presiding)1:46:21

   Uh, with that, uh, we'll, uh, bring it back to the committee for questions on the bill. Okay. Seeing no questions, uh, we'll send it to the public for public comment. Uh, This is a motion to substitute, oh, Sorry. Yeah, sorry. My bad. Uh, okay. The motion is to delete entitled embody Senate Bill one 16 to replace it with first substitute Senate bill one 16 income tax rate income tax rate modifications. All in favor, please say aye. Aye. Any opposed? Yeah, passed unanimously. The bill is substituted before US. Senator Fillmore. Alright,

6. Sen. Lincoln Fillmore1:46:57

   Uh, Mr. Chair. I really like this bill 'cause I like the policy behind this bill. And actually I think I'm united, uh, with, uh, most of my colleagues here. I, I think that we want to ensure that we are not taking more money from Utahans than we need to in order to fund the essential services of government. Um, so, uh, this bill sets up, um, uh, a structure by which, uh, that kind of automatically happens in the future. This has been done by North Carolina to great effect the point where North Carolina is now the most, uh, tax competitive and fastest growing economy in their region as a direct result of this policy. Um, so what the policy is, is we take, uh, it automatically reduces the income tax rate under the following condition. When state revenue collected, the entirety of state revenue collected is greater than the increase in population and inflation. Um, that is the marker by which we can judge, like we, we are, uh, funding essential government services and that has cost us so much money. Population is growing, inflation goes up. So, uh, that likely means that there is going to be an increase in the cost of those services. We wanna make sure we're taking that into account and that there's an increasing need of the, for those services based on the increase, uh, in the state's population. But money beyond that that we collect is, uh, is money that should be returned to taxpayers. And so this, uh, just defines what those amounts are, the targets that we set, it sets them five years in advance. Um, and so this would need to be revisited every several years, uh, uh, to, to reset those targets based on what actual collections are and what, uh, demonstrated needs are. Um, and then, uh, that upon meeting those targets, if there is excess beyond that, we would take about half, but I say about half, that was the change that we just did. 'cause that's the calculation that makes it difficult to do. And so what we've done is just say, how, how much money does it cost us to reduce the rate by one basis point? So then we double that amount. That's the target, right? So, uh, to reduce it by one basis point currently is about $11 million. So if we hit about $22 million, you'll see that. Then the rate goes down by one basis point. And in that way we're not, uh, cramping the state's flexibility because we are still keeping some of that additional growth that we can use for additional tax reduction. If we choose, perhaps there's a need that we felt like we haven't been able to meet until now, but with this extra revenue, we can meet that. So we're protecting legislative flexibility to be able to, to direct excess revenue, but also returning excess money that we have collected to the taxpayers. And that is my presentation on the substitute bill.

7. Committee chair (presiding)1:49:43

   Okay. Great. Uh, that concludes your presentation. We'll, we'll take it to Senator Escamilla for questions. Senator Escamilla.

8. Sen. Luz Escamilla1:49:49

   Thank you, Mr. Chair. A question to the sponsor. Go ahead. Um, so the scenario that you are, um, explaining in like a perfect world, I'm following here makes sense except we don't live in a perfect world. So I'm trying to follow, like, right, let's say the exercise we're going right now through in our appropriations committees of cutting everything, 5% becomes our budget, right? That's what we approve as, as like what the appropriations committees send to me. That's not meeting the minimum needs, uh, especially in social services. So I'm talking with like the social service lens, and some of you have serving that committee is brutal. So if let's say we apply this bill and this bill passes, and the next year we get, you know, all the formula happens and we, you know, now we're not able to fill back the, to utilize the entire extra income. Correct? That's what we're saying. So how do you ex explain that? I mean, in places where that we may not be because of the financial situation that we're facing, and we've had those in 2009, 2010, 2011. How do we explain that in, during those times? We know we were cutting bare bones, we're not cutting, you know, fabulous bones. And how do we go back to our constituents and say, look, we're not even gonna get there even if we have extra revenue.

9. Sen. Lincoln Fillmore1:51:17

   Mr. Chair, I appreciate that question. Uh, I'd say the answer to that is that, um, this is set on a specific dollar amount and that dollar amount is in the bill before we've made any of those reductions. And so I, I don't think that most of those reductions are going to, uh, be realized this year, but it's possible that we could find some efficiency. I think this exercise, speaking as a legislator on these committees has been a good one in identifying, Hey, we can tell we're appropriating too much here. There may be some savings that we can take. Uh, so that would be one part of the question. And the other is, we're not stopping economic growth. In fact, I would predict that we, uh, having this policy, if it follows what other states have done after enacting such policies, we will, we will see rapid economic growth as Utah becomes a more competitive place and a more desirable place for people to come and start businesses and to come and live and work. Um, and that as that economy grows, tax reduction does not take up all of the growth under this bill. It takes up about half of the growth. Uh, and so that other half of the growth is available to meet those pressing needs to the degree that we think that that should be met.

10. Sen. Luz Escamilla1:52:21

    Follow up question, Mr. Chair, please. Thank you for that answer. Senator. One more question. Does this Bill then stops them for doing more tax cuts?

11. Sen. Lincoln Fillmore1:52:31

    Uh, Mr. Chair, the answer to that is no. The legislature still retains full power, uh, uh, to cut taxes additionally or honestly to come back and dial those things back. Uh, this just sets up revenue targets so that some tax reduction happens automatically, but the legislature retains full power to set the rate to whatever it wants it to be. Okay.

12. Sen. Luz Escamilla1:52:48

    Thank you. Thank you Mr. Chair. Thank you.

13. Sen. Wayne A. Harper1:52:53

    Senator Harper. Thank you. Uh, Senator Fillmore on line 97 of the substitute bill. Um, you've added in transportation fund. All the other items that are listed there, um, for state revenue are all general fund transportation fund is separate. Why did you add that in? Uh,

14. Sen. Lincoln Fillmore1:53:20

    Just because I'm trying to capture holistic picture of state revenue. Uh, and, and, uh, and, and look at, you know, we have a lot of state needs. They're all state needs, right? Uh, and that, uh, I just, I wanted to capture all state revenue so that we have a real picture about what we're actually collecting.

15. Sen. Wayne A. Harper1:53:37

    Okay. But doesn't that go towards your formula?

16. Sen. Lincoln Fillmore1:53:40

    Yes. On both ends, right? Like if we took that out, we could do that, but then it would reduce the target by a similar amount. Okay. So does that make sense? You're expanding the target. Okay, good. Yes. Alright.

17. Sen. Wayne A. Harper1:53:51

    So your, your purpose of this bill is to go through and if I understand it correctly, is to go through and not really de deal with tax rates. Your focus is on Levi spending of the tax revenues. Is that correct?

18. Sen. Lincoln Fillmore1:54:07

    Yeah, recognizing that, uh, this money belongs to Utah taxpayers. Um, and if they've moved here, uh, and, and they're living here, they, you know, the, the environment that're living in has been good and positive, and we don't need to keep taking money from them. If, if the economic growth is such that we are getting, uh, more and more money each year beyond population and inflation growth, that the, the first and right thing to do in that case is to return those money to that money to taxpayers before we start spending all of that money. You know, I, I recognize there is always the greatest temptation to be able to, um, you know, if money is already in the pot, to be able to spend it as the first course rather than to return it to taxpayers. And I think the right course, because it's not our money, it's the money of the people we represent that it should be first returned to them before we can spend it.

19. Sen. Wayne A. Harper1:54:59

    Okay. And I, I appreciate that ex explanation. Um, I'm still chewing on the transportation fund because that's constitutionally restricted for road purposes, and

20. Sen. Lincoln Fillmore1:55:10

    That's fair enough. But of course, road purposes is a state function, right? And we, we, we collect and spend money for those roads every year. I would just say, I'm open to the idea that if we should take out that restricted fund, we can, we would make a compensating adjustment on the target. Yep.

21. Sen. Wayne A. Harper1:55:23

    And then on your target that goes through, and it basically reframes the, the box in which the legislature works on, on appropriations, saying that if some, you know, if we had a 5% in increase or 10% increase in revenue, we would automatically reduce that and have Less money to go through and potentially allocate.

22. Sen. Lincoln Fillmore1:55:45

    Um, I, I would use a different word than reframe how we do appropriations, but it certainly would change the amount that goes into that appropriations process in, into the formulas and the Yes. Calculations. Yeah. The process would be the same, but the amount that we would be working with would be less because we would have returned money to taxpayers ahead of time.

23. Committee chair (presiding)1:56:03

    Okay. Thank you. Thank you. Senator Harper. Senator Brammer.

24. Sen. Brady Brammer1:56:09

    Yeah. So under this, it would, any tax cut would happen automatically. I wouldn't say any tax cut, but at least a reduction in the income tax rate would happen automatically. And then it would be up to the legislature to decide. 'cause if that happened automatically, we would still have a budget surplus. Uh, and in that case, we could decide do we want to still return, uh, uh, additional money to taxpayers or do we want to, uh, allocate that to other state needs. Okay. And I guess part of my concern is, um, you know, a I've generally been in favor of virtually, you know, most tax cuts. I I'm, and they're fun to vote for, aren't they Conservative? And I enjoy voting for them, but I also think it's important that they be properly tailored for the time of the moment. And I'm not certain that that is always done when it's an automatically occurring, uh, issue. And, um, I, I understand the desire to, you know, what this does is it creates an inertia mm-hmm. Towards always cutting taxes when the rate is above a certain, you know, or when, when something exceeds the amount. But I do have some concerns about, um, whether, you know, whether it's it's wise or the correct amount or, you know, and oftentimes the tax cuts that we have are created by the policy of that year in order to create the tax cut. You know, so, so we will find, uh, a revenue, a specific revenue source that is now replaced or that, you know, that that does something. And so we work hard to create a tax cut oftentimes, and I worry that this will create an incentive for us not to, not to do that, because it will automatically occur in certain circumstances. And so, look, I like cutting taxes, but I'm not sure that, that, I want to vote for what I would call the one ring of all taxes of all tax cuts where, you know, one tax cut to rule them all. Like, you know, I I, I kind of, uh, would prefer to have a tailored system each year that is to the moment, to the context to the economy. And I'm not sure that this hits that. So thank Mr. Chair.

25. Unknown committee member1:58:41speaker not certain

    I, I, I don't know if I saw a, a question mark floating above his head at the end of that statement, but since we are in the q and A period, uh, by way of, I will say that he has identified the two drawbacks to this bill, and the first of those is the political one. Uh, 'cause, uh, I'm gonna humble brag here. I really enjoy my position as the highest rated senator on the Utah Taxpayers Association watch list. And, uh, uh, I, I think that's awesome. I love voting for tax cuts. I love bragging to my constituents that I voted for tax cuts, right? It's good politics. And here we are jamming five years worth of future bragging about voting for taxes into one vote, uh, in what, for me is not even an election year. Um, so I, I, I just, I understand that from a political perspective that, uh, politics wise, that creates something of a drawback. And the second thing is, is there's no doubt that this prioritizes reducing taxes on the income tax. It does not foreclose the possibility of, uh, doing a different kind of right. This year. There are proposals to cut to increase the family or the, the, the per child tax credit. I'm the sponsor of that bill, so it doesn't foreclose that possibility. But it certainly prioritizes income tax rate reduction as the first and preferred method of cutting taxes. I like that as a policy. Uh, I think as a senate, and certainly as Senate Republicans, I think we have long prioritized reducing the income tax rate. But I take the senator's point that in a given year that might not be the favorite tax cut, and this would have kind of already put at least a portion of that tax cut in place. And to your point, one of the, one of the concerns that I've always had is there are, uh, there are a lot of other, um, politically positive things that oftentimes get prioritized over an income rate tax cut and improperly, in my opinion. Uh, like if you want to juice the economy, if you want to impact people, a broad rate cut is your best bet. And it seems so simple. And so I love that about it. Yeah. It's kind of What we baked in here. Yeah. Yeah. I mean, when you, when you try to pick winners and losers with tax policy, it's not, it's not good. It, it ends up being just winners in the political realm and, you know, not, not a winner for the economy and the state as a whole. So I get that, but I do, I I do have some reservation on it. Uh, I think if we were at risk of not being as much of a super majority fiscal conservative state, I'd probably be all in. Mm-hmm. You know, but where I, I, I guess I do trust my colleagues to consistently make good tax policy because we have, you know, I don't know how many years in a row is the best managed state, and, you know, all of that stuff that I think they try to make good, good policy. So that's where I'm a little concerned on this one. I Take those and though, yeah, I, I, I recognize those are valid criticisms or I don't know, a valid statement of, Hey, there are other priorities here too. I recognize that. Thanks.

26. Committee chair (presiding)2:01:48

    Okay. Thank you. That concludes, uh, questions from that part of the committee.

27. Committee chair2:01:52speaker not certain

    Let me ask you really quickly, um, when the bill passes, will this be part of the revenue forecast such that it will come off the top before everyone hears about it? Or is this the kind of thing that there'll be a fiscal note attached to it and, you know, there wouldn't be a fiscal note? Right? So this really would come off the top, is the way I understand the bill. It would Come off the top, it would be part of E'S budget recommendations going in. Okay. That's what I need, the light bulb. Uh, you almost had Senator Escamilla when you said, well, now this will stop other tax decreases. You almost had her. She like, she was like, well, maybe I like this. I like it. So you had tempted there for just a second, so that was good.

28. Committee chair (presiding)2:02:39

    Okay. Uh, with that, we'll conclude questions from the committee and go to the public for public comment. Uh, if you'd like to speak in favor with that, raise your hand, please. Come board, go ahead. Got two. So

29. Jen Brown, President, Utah Citizens for the Constitution2:02:58

    My name is Jen Brown. I'm president of Utah Citizens for the Constitution and represent hundreds of citizens. We would like to thank the sponsor for his work on this. And we, I just really liked the way that he reminded everyone that it is the tax, it's the citizen's money to begin with. And so I think putting this in place where with, when there's more than is needed, it goes back to the citizens. I think that that's good policy and we hope that you will support it. Thank you.

30. Billy Hesterman, President, Utah Taxpayers Association2:03:30

    Thank you. Good afternoon, Mr. Chair and committee Billy Hesterman with the Utah Taxpayers Association. Uh, we wanna speak in favor of the legislation. We just wanna share with you the, uh, income tax rates from our surrounding states. We have Idaho, who is a little bit higher than us, but they're the only one. They're at 5.3%. Wyoming has a zero. Nevada has a zero, Arizona's at 2.5, and Colorado's at 4.25. And as companies and jobs look for, uh, uh, places to relocate or places to expand, they do look, that is one of those, you know, one of the many in the recipe of what they look at on where they want to go. And so to keep us competitive, we do feel like any effort to bring down our income tax rate so that people see us as a, as a business friendly state, in a state where the economy can thrive, that they'll recognize this, uh, this effort that the legislature is doing to, to bring that down and make sure that we're still, uh, staying in the neighborhood of our, our fellow states and making sure that, uh, this is the place where they want to come. So we hope you'll move it forward. Thank you.

31. Committee chair2:04:31

    Let me ask you, uh, Mr. Hesterman, um, lemme ask you this. Yep. Uh, you know, the, um, the question I have for you is this will come off the top, uh, and, you know, revenues, uh, won't, you know, won't reflect the, this money being there. Uh, in some ways it's a non-transparent tax cut. Uh, it's kind of an interesting dynamic, right. Uh, thoughts on, you know, whether or not this should be a, you know, I don't know, some kind of transparent transparency thing, or not, just a question for you. It does seem like it, it would be beneficial for maybe a statement from the tax commission yearly on where the collections are and what that does to the rate, so that there is a, uh, uh, you know, we do that with the gas tax where there's a annual notice on where, how the gas tax is being adjusted. If there was some opportunity for, uh, you know, the revenue to be noted and how the rate is being adjusted, that, that would add, uh, I think a little more transparency to what's happening. Yeah. Okay. Yeah, just, uh, it's, it's interesting. I appreciate that it comes off the top 'cause we don't see it, which, you know, does help cut spending.

32. Committee chair (presiding)2:05:45

    So, thank you. Next up.

33. Brent Hutchinson, PTA2:05:49

    Hi, Mr. Chair. Thanks for the opportunity to speak again. Uh, my name's Brent Hutchinson, um, and I'm a resident of Provo, member of PTA. Um, historically income taxes have helped fund education, and I know the popularity of cutting taxes. I just want to perhaps give a word of caution against just a blanket cutting taxes for taxes sake. You know, we say we love to cut taxes until we think about what those things fund and creating the incentive to cut those taxes without, as, uh, Senator Brammer suggested considering what those economic conditions are for that year, um, the needs of the state, uh, those things are important. And so I understand the appeal, um, of spending wisely. I'm all for that fiscally responsible, uh, responsibility. But I also encourage us to think carefully about the mechanisms that we're setting in, in place and in motion. Um, and remembering that income tax is one of the most progressive forms of tax. Um, whereas when we cut unduly in one area, it places a larger burden on property taxes and other things to fund the things that we care for. So just keep that in mind. Um, I'm not sure this is where I would support the bill currently, but I hope You consider carefully.

34. Committee chair (presiding)2:07:35

    Thank you. Thank you very much. Well said. Is there anybody else that wanted to speak? Okay. Seeing, uh, no one else will, uh, bring it back to committee for action on the bills. Senator Fillmore, do you wanna make a motion on your own bill?

35. Sen. Lincoln Fillmore2:07:48

    Uh, yeah. Thank you. Uh, Mr. Chair? Yeah, I move that we, uh, favorably recommend first substitute Senate bill one 16.

36. Committee chair (presiding)2:07:59

    Okay. Have motions in order. Would you like to speak to that?

37. Sen. Lincoln Fillmore2:08:02

    I would. So, you know, we're early in the session here. In fact, there are two other, uh, at least three other right, but at least one other income tax bill on today's agenda. And I feel pretty confident that we will not pass both. Um, and, uh, I, I, I'm sorry. I today, I mean, I just mean over, you know what I mean, stop it. Today. I think we should pass both so that they're in the, so that they're in the hopper. Um, you know, there's gonna be another, uh, income tax credit expansion that's gonna be coming over from the house. And, you know, we're, uh, I I, if we are fortunate enough to be able to cut taxes this year, um, you know, we'll be, we'll all be part of a negotiation on what that final tax package would look like. I'd like to, uh, ask the committees, uh, to the committee to move this forward so that this can be part of that overall discussion. Um, I, I'll, I'll be voting for the, the chair's, uh, tax bill when he presents it, because I think that should be part of our conversation going forward. And, you know, we're gonna have discussions on the gas tax and on, uh, the tax credit that I've already mentioned, uh, on different, uh, property tax, uh, initiatives, some of which we'll consider today. Those really, at this stage, those all ought to be part of our package. Uh, and we all know, you know, we'll be winnowing those down and, um, some, hopefully some tax cut bill will pass this year. Um, and that, uh, that I, I hope that I can get the committee's support to make this bill part of that discussion.

38. Committee chair (presiding)2:09:33

    Okay. Delight bulb. Uh, any questions or anything else? Seeing none, I'll place that motion. The motion before us is to pass favorably Senate bill. Oh, wait. Uh, your income tax rate modifications does have a substitute. We did substitute it. We did have, okay. That's right. So we're on the first set. All right. So it's first sub demotion is to pass first substitute house bill one 16 income tax rate modifications. All in favor, please say aye. Aye. Aye. Aye. On two, we're getting a little creative here on the committee, so, uh, any opposed? No. Okay. So that's going to pass narrowly three to two. Uh, did you wanna explain your vote? Senator Escamilla, you had your hand up? I wasn't sure if No. Okay. All right. I'm just glad you had all your fingers up. Alright. Okay. Okay. Sorry, I'm just picking on center asking me today, so, okay. Thank you. Uh, that passed is favorably three to two. Thank you very much, Senator? Yes.

39. Committee chair (presiding)2:10:37

    Okay, I'm gonna yield the con to, uh, Senator Fillmore. Uh, you can take over while I present, uh, the last three bills on our agenda with Your chair. I'll

40. Sen. Lincoln Fillmore (presiding)2:10:50

    have to, uh, the meeting at, or Be done? Please reschedule. Alright, I will take the chair. Okay.