Income-tax revenues down 12.6%

Utah legislators were told Wednesday that because the Utah Tax Commission may be "underwithholding" on personal income taxes, come next April's tax-payment deadline a number of Utahns may have to pay the state more money.

The "underwithholding" could amount to $40 million to $60 million in total, an open Utah House GOP caucus was informed.

State government continues to suffer financially due to the nation's economic downturn — officially referred to as a "recession" by Bush administration officials Wednesday.

Wednesday the Utah Tax Commission released its first TC23 revenue report for the fiscal year that started July 1. The report shows a 12.6 percent drop in state personal income-tax revenue from a year ago — not a good sign.

In the huge revenue surpluses seen in the mid-2000s, state income tax was a strong driver in state revenue growth.

Lawmakers met in special session last month to close an anticipated $278 million shortfall in ongoing tax revenues this fiscal year.

And leaders warned then that Utah's budget/tax revenue woes may not be over. Wednesday's report tends to support that fear — although the Tax Commission several years ago stopped putting revenue estimates in its TC23 reports.

House budget chairman Ron Bigelow, R-West Valley, told an open House caucus Wednesday afternoon that more bad tax revenue news is likely ahead. Come January's 2009 general session "We may be doing the same thing again — tightening our belts (cutting programs) and moving things around a bit."

Senate President John Valentine, R-Orem, said that the Senate Republicans talked about the numbers, which were expected, in their closed caucus meeting. They did not think, however, that one month's report would necessarily foreshadow next year's final budget numbers.

"We're not making any further cuts until January, at the earliest," he said. The next general session, which begins mid-January, will be "very fiscally intensive."

The new report shows that sales tax revenue is down 3.4 percent from a year ago. Transportation tax revenue is down 6.7 percent, as well.

Tax Commission officials noted that sales tax take is down — by $15 million — in part because of reduced retail sales, but also because the Legislature and governor reduced the sales tax on unprepared food — a tax break.

And commission economists said that one reason personal income tax revenue collections are so far down — by $70 million — may be because of new withholding tables, instituted by the commission as part of the state's new 5 percent flat-rate income tax system, which took effect Jan. 1.

Come April 15 many Utahns may owe money to the state — not having enough money withheld from their pay checks during 2008. And state revenues could see a jump then.

There are a few bright spots in state tax revenues, although they are smaller tax sources and don't make up for the big losses in personal income and sales tax.

The state's oil and gas severance taxes nearly doubled over a year ago — more oil production, mainly in eastern Utah — from $23 million to $45 million.

And corporate income tax revenue is up by nearly one-fourth from a year ago, or $21 million.

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