How Does the State of Utah Make Its Money?

State governments collect revenue to support public services and operations that benefit residents. Understanding how a state gathers these funds provides insight into its economic structure and the priorities it supports for its population. The various sources of income ensure the state can maintain infrastructure, provide education, support healthcare, and deliver other essential government functions.

Key Tax Revenue Streams

Utah’s financial foundation largely rests upon several key tax revenue streams, with individual income tax, sales and use tax, and property tax forming a significant portion of the state’s overall collections.

Individual Income Tax

Individual income tax is a substantial contributor to Utah’s state government revenue. The state employs a flat income tax rate. For the 2024 tax year, this rate is 4.55%, although it is set to decrease to 4.50% effective January 1, 2025. This flat rate simplifies the tax structure.

Sales and Use Tax

Sales and use tax is another significant revenue source, collected on the retail sale of tangible personal property and certain services. Utah’s state sales tax rate is 4.85%, with local jurisdictions imposing additional rates that can result in a combined rate ranging from approximately 4.7% to 9.50%. Food and food ingredients are subject to a uniform statewide sales tax rate of 3%.

Property Taxes

While property taxes are primarily levied and managed at the local government level, the state maintains an influence and receives some indirect benefits. Utah has a relatively low effective property tax rate on owner-occupied housing, averaging around 0.47% to 0.55%. The state’s “truth in taxation” laws help to keep property tax burdens low.

Fuel Tax

Fuel tax, also known as the gasoline tax, is imposed on motor fuels and is primarily earmarked for transportation infrastructure. As of January 1, 2025, the gasoline tax rate in Utah is 38.5 cents per gallon.

Corporate Income Tax

Corporate income tax is levied on the profits of businesses operating within Utah. Utah applies a flat corporate income tax rate, which is 4.55% for the 2024 tax year and will decrease to 4.50% effective January 1, 2025. Domestic and foreign corporations are subject to this tax.

Severance Taxes

Severance taxes are applied to the extraction of natural resources from the state, such as oil, gas, and other hydrocarbons. For oil, the tax rate is 3% if valued at $13 or less per barrel, increasing to 5% for values above that threshold. Natural gas is taxed at 3% for values of $1.50 or less per thousand cubic feet (MCF), and 5% for amounts exceeding that price, with natural gas liquids taxed at a flat 4%.

Excise Taxes

Utah also collects excise taxes on specific goods, contributing to the state’s general fund. For instance, cigarettes are subject to an excise tax of $1.70 per pack.

Federal Funding and Grants

Federal funding represents a significant portion of Utah’s overall revenue, providing financial support for a variety of state-administered programs and initiatives. These funds are typically received in the form of grants, which are often earmarked for specific purposes and come with federal requirements and guidelines that the state must adhere to.

In fiscal year 2024, federal funds comprised 27% of Utah’s total spending. This financial partnership helps to support programs that might otherwise strain state and local budgets.

A large portion of these federal funds is allocated to social services, housing, and community development programs. Medicaid, a joint federal and state healthcare program, accounts for a substantial share.

Education is another area that receives significant federal support. Federal dollars, while comprising about 7% of Utah’s total education budget, strategically target specific needs. This includes funding for child nutrition programs, special education services, and Title programs designed to support economically disadvantaged students.

Federal grants also contribute to transportation infrastructure projects and other social services.

Other Significant State Revenues

Beyond taxes and federal aid, the State of Utah generates revenue through a diverse array of other sources. These additional income streams often derive from direct services, regulatory activities, or strategic financial management.

Fees and Licenses

Fees and licenses represent a consistent source of state revenue, collected for a wide range of services and regulatory functions. This includes charges for state-issued permits, professional licenses, and business registrations.

Fines and Penalties

Fines and penalties collected from various infractions contribute to the state’s coffers. This revenue stream includes funds generated from traffic violations, court-imposed fines, and other penalties for non-compliance with state laws and regulations.

Investment Income

Investment income is another important component of the state’s financial portfolio. The Utah Office of State Treasurer administers significant funds, including the Public Treasurers’ Investment Fund. Revenue generated from school trust lands is deposited into the Permanent School Fund, with earnings distributed annually to support public education.

State-Owned Enterprises and Services

State-owned enterprises and services also generate substantial revenue. The Utah Department of Alcoholic Beverage Services (DABS) manages the sale and distribution of alcohol in the state. In fiscal year 2024, sales were nearly $579 million, returning over $218 million to state and local communities. Other sources include fees collected from state park entrances and revenues derived from the management of state lands by the Trust Lands Administration.