Utah House approves tax-rebalancing bill to stabilize education funding, freezes property tax rate for five years

SALT LAKE CITY — The Utah House of Representatives on March 8 passed first substitute House Bill 293, a tax-rebalancing package the sponsor said will steer new dollars to K-12 education and create greater stability in property-tax revenue for schools.

Under the bill, the individual and corporate franchise income tax rate is reduced from 5.00 percent to 4.95 percent and the Legislature would set a floor for the basic property-tax rate at 0.0016 for five years. The measure also links 15 percent of any increase in the weighted pupil unit (WPU) to property-tax revenue, a change sponsors said will help equalize funding for districts with low assessed valuation.

"Probably the easiest thing to understand is that it reduces the income tax and corporate income tax from 5% to 4.95%," the sponsor said during floor remarks. He told colleagues the freeze and indexing are intended to stabilize the basic rate and direct additional revenue where it is most needed in education.

Sponsor remarks and subsequent questions clarified how the changes will be implemented. The sponsor said the freeze at 0.0016 is a five-year floor and that the indexing mechanism tied to the WPU will be treated as part of the annual school-finance bill and must be approved by the Legislature each year. He also said the measure is expected to generate about $125,000,000 in additional education funding over the first five years of the program.

Lawmakers pressed the sponsor on several points, including whether the indexing will create an ongoing tax increase beyond the five-year freeze; the sponsor responded that the five-year freeze generates the initial increase and the Legislature must act each year for additional adjustments. Representative 20 asked whether the indexing could be presented as an individual line item in future budget deliberations; the sponsor said the indexing is tied into the school-finance bill and could be reviewed in that process.

Supporters, including educators in the House, framed the bill as a structural fix to the state’s education funding “three-legged stool,” while opponents raised concerns about the long-term tax implications and the interaction with other equalization proposals under consideration.

After debate and a series of amendments and technical fixes, the House adopted the measure by a roll-call vote of 50 in favor and 23 opposed. The bill was transmitted to the Senate for further consideration.

Next steps: the bill now moves to the Senate for consideration and potential further amendment; sponsors said the indexing piece will continue to be part of the annual school-finance discussion.