Utah Senate passes sweeping tax-restructuring package with grocery credit and targeted EITC

The Utah Senate on Dec. 12, 2019, approved a wide-ranging tax-restructuring package—fourth substitute Senate Bill 2001—that cuts individual and corporate income-tax rates, restores some dependent exemptions, expands the sales-tax base to include selected services and previously exempt items, and creates targeted grocery credits and a limited state earned-income tax credit (EITC) to offset effects on low-income households.

Sponsor Senator Hilliard framed the measure as an effort to broaden the state’s consumption base so revenue will "grow with the growth in population," while returning some surplus revenue to taxpayers. "This bill reduces individual and corporation income tax rates from 4.95 down to 4.66," Hilliard said on the floor. He described a package of policies that also "transfers Medicaid match money" in the separate behavioral-health bill and that includes measures to help school lunches and rural roads.

Key provisions explained on the floor include:

- A reduction in income-tax rates for individuals and corporations (sponsor cited a cut from 4.95% to 4.66%). - Restoration of a dependent exemption and a one-time rebate for 2019 filers. - A limited earned-income tax credit targeted at households defined under the state's intergenerational-poverty program; Hilliard said the state EITC will be 10% of the federal benefit and estimated the fiscal cost at about $6,000,000. - Reinstatement or expansion of sales tax on some services and previously exempt items (sponsor said 14 exemptions were repealed and listed examples such as certain event tickets, electricity to ski resorts, some fuels and motor-vehicle rentals). Ride-hailing, pet boarding/grooming, identity-theft protection, and streaming media were among services discussed for taxation. - A grocery credit and a prebate mechanism intended to provide near-term relief to low-income households who would otherwise have to wait until filing next year; Hilliard pointed to a statutory section for an "additional grocery tax credit." He said the bill aims to offset the effect of restoring sales tax on unprepared food for eligible households. - Transportation changes intended to shift more road funding to user fees over time, adjusted gas and diesel tax approaches, and $5,000,000 allocated to a group of rural counties for road needs. - $500,000 for the Department of Workforce Services to identify eligible households who may not file tax returns, to ensure they can obtain credits.

The bill drew extended debate. Supporters said the measure stabilizes the general fund by broadening the sales-tax base and reduces the volatility of relying principally on income tax for education funding. Opponents argued some components—particularly full sales tax on unprepared food—are regressive and risk harming low-income households. Senator Escamilla explained his 'no' vote by pointing to concerns that the food-tax change could disproportionately affect large families in his district. "I cannot, in good faith, support legislation that brings that back," Escamilla said, explaining his vote.

Lawmakers also offered several floor amendments. Notable proposals included an effort to restore corporate tax revenue by raising the corporate rate (an amendment that ultimately failed on the floor) and amendments focusing on school-lunch funding and items such as incontinence products (those amendment attempts were debated and either withdrawn or rejected according to the floor record).

After final debate and roll-call explanations, the fourth substitute for SB2001 received 20 yay votes and 7 nay votes, with 2 senators absent, and was passed and sent to the House for consideration.

The measure is complex and technical in implementation; sponsors and staff noted that some line numbers and precise statutory language would be finalized in the substituted text and that several provisions require administrative rules and outreach to ensure eligible households can claim credits.