Slashing corporate taxes may boost Utah economy

A group of GOP House members were in lock-step Wednesday with Republican Gov. Jon Huntsman Jr., giving first approval to the "critical piece" of his economic development legislation — even though it could cost Utah schools $200 million within eight years.

HB78, sponsored by Rep. Wayne Harper, R-West Jordan, has two main parts:

• In 2007 it would reduce corporate income taxes by $4 million by giving businesses the option of figuring their state taxes two different ways, picking the most advantageous.

• Starting in two years, the current 5 percent corporate income tax would begin being phased out, costing the state more and more tax revenue each year. And by 2012 the tax would be gone completely, with the Uniform School Fund losing an estimated $200 million that year.

Huntsman's chief economic adviser, Chris Roybal, told the House Revenue and Taxation Committee — which approved the bill on a strict party-line vote — "the corporate income tax is not a very stable (source of) revenue."

And the economic development benefit of doing away with the tax "far outweighs the tax take, anyway."

But committee Democrats and even a few Republicans worried out loud that it was premature to jump at such a major tax change when legislators and citizens don't know the rest of Huntsman's economic development tax reform plans, much less how he'll overhaul all state taxes as part of that plan.

The rest of the tax reforms will come later this year, said Roybal, as lawmakers and Huntsman aides together form a task force to look at all state taxes — a pledge Huntsman made in his campaign last year.

To adopt HB78 now requires "a leap of faith," said freshman Rep. Tim Cosgrove, D-Murray. What if the new job growth doesn't come? How will schools survive?

Actually, said Harper, it's more of a "leap of trust" in the new governor and his abilities to attract new businesses to Utah and grow existing businesses to create a bunch of new jobs.

Harper, a former economic development boss for the city of West Jordan, said within a few months Huntsman will announce a major new business coming to the state.

Sarah Wilhelm, fiscal analyst for Utah Issues, said HB78 shouldn't be adopted now because in order to make up the $200 million loss, it would take 75,000 jobs at $50,000 salaries. But Harper said the new firm's Utah employment "would take a significant bite" out of that goal. He declined to name the firm.

Wilhelm said there are better ways to target economic development without eliminating taxes for a large segment of Utah society.