From Deseret News archives:

Major tax reform is a tough political pill to take

Published: Thursday, June 9, 2005 11:46 p.m. MDT
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And those political knees buckled over just a few sales tax exemptions.

What will happen if legislators take away the charitable deduction on state personal income taxes?

Jones found that 70 percent of Utahns want to keep that deduction, along with the one for home mortgage interest and dependent children.

In a broad-ranging tax reform study prepared last December by former Gov. Olene Walker, one of the major findings was that Utah's sales tax base is shrinking. Yes, the sales tax revenue is growing. But there's clearly trouble ahead as more and more of Utah's economy becomes service-based and is not subject to the sales tax.

Huntsman has said a number of times that somehow the sales tax base must reflect the current economy, not the manufacturing-based economy of 30 or 50 years ago.

But tax experts say that Utah's health-care industry — like health-care industries across this country — makes up so much of the service economy that if you exclude it from taxation in any reform, you aren't going to raise enough money from taxing haircuts, attorney fees and lawn-care services to be able to afford to make some of the other major tax reforms needed.

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Yet 90 percent of Utahns — a huge number in any public opinion survey — oppose placing the sales tax on health-care services.

By necessity the Tax Reform Task Force's work must be relatively quick. Members are supposed to have concrete recommendations by November, in time for public discussion before the 2006 Legislature meets in January.

It appears the co-chairmen — Sen. Curt Bramble, R-Provo, and Rep. Wayne Harper, R-West Jordan — have an idea of where they want to go.

Already, a subcommittee of the whole 15-member group has voted, as a starting point, to adopt a flat rate income tax of 4 percent that doesn't include the popular deductions for charitable giving, home mortgage interest and dependent children.

(Watch for some of those deductions to creep back into the reform recommendations.)

Democrats on the task force (only three of the 15 members) want to talk about the Jones/Mascaro bill — an effort to reduce the number of dependent deductions on personal income taxes, and thus make large families pay more for their children's public education.

But it's looking like task force Republicans don't want to spend much time on that idea — which in one form or another has failed for three straight legislative sessions.

Still, task force members say all options are on the table — as they should be.

Yet it looks like Utahns are not that upset with the state's tax system. And so the timing of reform may not be ripe.

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