Phillips was born in Cleveland to Edwin Deroger Phillips and Frances Kathleen Coates. His father, Edwin Phillips, was a labor organizer, and his parents' activism influenced much of his life's work. Phillips was a card-carrying member of the Industrial Workers of the World (Wobblies), which are headquartered in Chicago. His parents divorced and his mother remarried. Phillips was adopted at the age of five by his stepfather, Syd Cohen, who managed the Hippodrome Theater in Cleveland, one of the last vaudeville houses in the city. Cohen moved the family to Salt Lake City, Utah, where he managed the Lyric Theater, another vaudeville house. Phillips attributes his early exposure to vaudeville through his stepfather as being an important influence on his later career.

Phillips attended East High School in Salt Lake City, where he was involved in the arts and plays. He served in the United States Army for three years in the 1950s. Witnessing the devastation of post-war Korea greatly influenced his social and political thinking. After discharge from the army, Phillips rode the railroads, and wrote songs.