A tax credit score for retirees and ex-military personnel sounds nice, however lawmakers have steered it in direction of higher-income taxpayers

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A tax credit for retirees and ex-military personnel sounds great, but lawmakers have steered it towards higher-income taxpayers

(Francisco Kjolseth | The Salt Lake Tribune) Robert Gehrke.

If you really want a Republican legislature’s eyes to light up, talk about tax cuts – the thrill of a half a percent cut and the love of a discount that ends somewhere between family and guns on their list of true loves.

When lawmakers came to the session, they vowed to cut taxes, and last week we looked at what the proposed $ 100 million package would include.

It has two main parts: First, they want to address changes in Trump tax law that have ultimately increased the burden on some Utah families. Second, they want to give retirees and military pensions a tax break.

Some lessons were clearly drawn from the legislature’s unfortunate push for sweeping tax reform in 2019, which collapsed under its own weight, widespread opposition to a food tax hike, and the likelihood of voters getting the package through a nearly never used referendum .

This time the tax proposal is tighter and easier to submit. Who in their right mind would question tax breaks for seniors and veterans?

However, we should take some time to unpack these suggestions and see who they are helping and, more importantly, who they are not helping.

The first big piece – correcting the Trump tax hike – is probably the most obvious adjustment. In 2017, the federal tax law reduced the dependent deduction, which created a domino effect. Families – especially large families – ended up paying more state taxes.

Even if you think large families should be paying more than they do (and they probably should), it shouldn’t happen by accident. Legislature partially addressed the issue in 2018, and SB153, sponsored by Senator Lincoln Fillmore, is getting closer to getting these taxpayers back into the status quo before the law was changed.

The other two components of the tax package look positive at first glance. The first, HB86, eliminates income tax on some Social Security incomes. The other, SB11, eliminates income tax on military pensions. (Those who happen to be receiving social security and a military pension would have to opt for one break or another).

No-brainers right? Who wants to tax grandma on a fixed income so she can send her grandchildren a $ 5 birthday check? Or punish those who risk their lives for the country and are now just trying to keep a roof over their heads?

The problem really is that the bills are not helping these people. In fact, they are doing nothing for the people who are most in need.

In fact, more than 70% of the social security contribution tax break would go to households making more than $ 91,000 a year a year, according to the fiscal analyst and analysis by Voices for Utah Children, a low-scoring group-income children.

The military pension piece is even more geared towards wealthier Utahns. The data shows that more than 90% of this tax break would go to households earning more than $ 91,000 and 60% would go to the top fifth of Utah earners, with those households making about $ 133,000 and more.

Almost no Utahn with a household income less than $ 63,000 a year would see the relief.

There are a number of reasons for this, according to Matthew Weinstein, the director of state finance at Voices for Utah Children.

One reason is that Social Security is largely tax exempt for most low- and middle-income seniors thanks to the Utah Taxpayer Credit and federal policy.

So the seniors who really come around – like the 22,500 Utah retirees who live in poverty – don’t pay a lot of taxes. Since the newly proposed tax credit is non-refundable, which means it only counts against what you pay, and beyond that, you cannot get any money, it won’t help.

Those it helps are those who have other sources of income, such as a 401,000 or other retirement account, or perhaps some other taxable investment income. And the more of that income they have, the more generous – proportionally – the loan is until they reach the ceiling of $ 145,000 in household income.

The military pension loan has the same problems. Those on the lower end do not pay much in taxes and will benefit very little, if at all. So these veterans who are homeless or about to become homeless? We are sorry.

The benefits come almost exclusively to those who do not decide whether to pay rent or buy groceries. Instead, $ 12 million goes to those who make more than $ 133,000 a year.

Again, I’m not saying we shouldn’t try to help seniors and military retirees, just that those bills are not structurally helping those who need them most.

There are better ways to help more of the working Utahns who are barely making ends meet. At the start of the session, I looked at proposals to raise the state’s minimum wage, and while I realized that politically, Utah Republican lawmakers probably wouldn’t (although Senator Mitt Romney recently advocated a moderate increase), I argued that one state tax credit, sponsored by Rep. Robert Spendlove, R-Cottonwood Heights, would benefit many of these people.

It would put up to $ 640 in the pockets of working low- and middle-income families, many of whom still struggle, and would actually cost less than the social security and military income tax breaks lawmakers give to the rich want utahns.

It has legislative support and was actually passed as part of the 2019 tax reform package, only to be repealed with the rest. I foolishly thought this could be the year we finally see an EITC out of law.

“I think it’s clear that a lot of people are positive about this. It’s just a question of whether [the legislators] I want to focus on a lower or middle income or a higher income, “said Weinstein.” And it seems like this year they made their decision and want to focus on the upper, middle and upper income. “

And keep in mind what this means when talking to legislature’s priorities. With that $ 100 they could have paid for an all-day kindergarten or preschool, helped low-income workers, expand affordable housing, insured more low-income children, support COVID recovery, invest in clean air programs, or a host of million.

Instead, they decide to give it to mostly wealthy Utahns.

But give it to the legislature. You learned an important lesson from your 2019 tax fiasco, and that is that marketing matters. Unfortunately, their priorities have not changed, and lawmakers have missed an excellent opportunity to provide more aid to the most vulnerable Utahns.