Utah SB60: Proposed income tax rate reduction for 2026

On January 7th, Senator Daniel McCray (R-Riverton) submitted SB60 to the Utah State Senate. The bill proposes reducing Utah's flat income tax rate from 4.5% to 4.45%, beginning in tax year 2026. This would continue Utah's trend of income tax cuts, marking the fifth consecutive year of rate reductions since the tax rate stood at 4.95% in 2021.

We at PolicyEngine have analyzed the effects of this proposed change on the state of Utah and its residents.

Key results for 2026:

• Reduces state revenues by $83.6 million
• Benefits 53.2% of Utah residents
• Has no effect on the Supplemental Poverty Measure
• Raises the Gini index of inequality by 0.01%

Use PolicyEngine to view the full results or calculate the effect on your household.

SB60's proposed 0.05 percentage point reduction would continue the state's pattern of annual income tax cuts. Since 2021, Utah's tax rate has dropped from 4.95% to 4.85% in 2022, 4.65% in 2023, 4.55% in 2024, and 4.5% in 2025.

Unlike the 2025 tax package which included multiple provisions affecting the Child Tax Credit and Social Security credit, SB60 focuses solely on the rate reduction.¹

Let's examine how SB60 affects a single adult's net income in Utah. Due to interactions with the Utah taxpayer credit, this household does not benefit with earnings below $20,500. Above this threshold, the taxpayer credit begins to phase out, and tax savings become proportional to earnings. For example, at $80,000 of earnings, the single adult would see their Utah income tax liability decrease by $40. Figure 1 displays the change in net income for a single adult as earnings rise.

For tax year 2026, SB60 would reduce state revenues by $83.6 million, according to PolicyEngine's static modeling.

The tax cut would raise the net income of 53.2% of residents in Utah. The percentage of residents in each income decile who are net beneficiaries varies, with residents in higher-income deciles more likely to benefit since they have greater taxable income.

SB60 would provide an average benefit of $130 per household, ranging from $5 in the bottom income decile to $583 in the top decile.

We project that SB60 would have no effect on poverty or deep poverty while raising the state's Gini index of inequality by 0.01%.

SB60 would continue Utah's trend of annual income tax reductions by lowering the flat rate from 4.5% to 4.45% beginning in 2026. The proposal would reduce state revenues while providing tax savings to a majority of Utah taxpayers, with higher-income households receiving larger absolute benefits due to the nature of flat-rate income tax cuts.

As policymakers evaluate reforms such as these, analytical tools like PolicyEngine offer critical insights into the impacts on diverse household compositions and the broader economy.

We invite you to explore our additional analyses and use PolicyEngine to calculate your own tax benefits or design custom policy reforms.