2 sides duel over a Utah flat tax

Deductions for giving, mortgages are big issues

Published: Thursday, Sept. 15, 2005 11:27 p.m. MDT
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Utah charities, advocates for homeownership and for the poor and other "tax stakeholders" pleaded with a state tax reform committee Thursday not to take away long-treasured deductions from state personal income tax returns.

But several members of the Tax Reform Task Force and flat tax advocates say charities — including The Church of Jesus Christ of Latter-day Saints — homeowners, seniors and families with dependent children really should not fear a state flat-rate income tax with no deductions. They cited studies and history that show people still give to charities, still buy homes, still support the arts. The poor will also still receive aid and people will still have children even if those targeted tax deductions are eliminated.

"There is no reason to say that the home mortgage interest deduction has any impact on homeownership rates," Utah Taxpayers Association vice president Mike Jerman said.

Likewise, a study of charitable giving in America over the past 30 years shows "no connection" between marginal income tax rates and the amount donated to charities, said Jerman, whose group proposed its own flat-rate income tax plan Thursday.

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It was also learned Thursday that Gov. Jon Huntsman Jr., who has spoken out in favor of a "flatter" state income tax that contains no deductions, has put together a "brain trust" of tax experts who are sorting out various flat-tax proposals for his consideration.

The "brain trust" consists of Brigham Young University business professors Gary Cornia and Ray Nelson, as well as tax expert Keith Prescott, who actually has been Huntsman's personal tax preparer for years. Cornia, Nelson and Prescott also served on former Gov. Olene Walker's tax reform group, which, among other things, last year recommended a flat rate income tax for Utah.

The trio "will make presentations (on behalf of Huntsman) to the task force in a few weeks, after they've finished their preparations," said Huntsman spokesperson Tammy Kikuchi.

Other sources said Huntsman will likely propose a flat-rate income tax, one that gives special aid to lower-income Utahns, and may contain some type of partial deduction for charitable giving — a salve to nonprofit entities.

Under the Utah Taxpayers Association plan presented Thursday, everyone would pay a 4.9 percent personal income tax rate. (Most Utahns are now in the top bracket, a 7 percent rate.)

But no tax would be paid on the first $10,000 earned for an individual, the first $20,000 for a married couple.

To further give low-income Utahns a tax break, a food tax earned credit of $75 would go to every person in a family up to $30,000 of family income.

Overall, the taxpayers association plan would give a tax break to all low-income Utahns and give tax cuts to most middle-income Utahns as well. Middle- to upper-income families carrying large mortgages, and with a number of dependent children, would see tax increases, Jerman said.

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