Tax cut possible: Lawmakers hope to provide election-year relief

Under the dual system, a taxpayer could choose the current system, with a 7 percent top rate, and a number of deductions and exemptions, including mortgage interest and charitable giving. Or the taxpayer could choose a true flat-rate tax — no deductions at all, where the new, lower flat rate would be applied against the taxpayer's adjusted gross income, explained Valentine, a tax attorney.

Since the taxpayer would pick the system that gives him the greatest tax advantage, there would be no losers in the change, legislators and Huntsman say.

But, Curtis said, the lion's share of the $70 million tax cut allocated to the flat-tax returns would assuredly go to the wealthiest of Utahns — who don't get that much of a tax benefit from the current system's deductions and exemptions.

"You would see the wealthiest among us, those making $250,000 a year and more, eating up most of that $70 million tax cut because they would choose to pay the lower rate. I have a real problem with that, and so would many of my House colleagues," Curtis said.

Speaking to the Deseret Morning News editorial board, House Democratic leaders said they oppose giving a $70 million income tax cut. By law, income taxes go to public and higher education, and House Minority Leader Ralph Becker, D-Salt Lake, said Democrats will do whatever they can to stop a special session or passage of a tax cut that could better be used for critical state programs.

The governor's H3 "flatter-fairer" income tax reform passed the Senate but died in the House the final night of the general session.

Huntsman thought he probably could force it through in a summer special session. But then the State Tax Commission said original estimates that the "fairer-flatter" 5 percent tax would cost around $70 million — the amount legislators allocated for the personal income tax cut — proved inaccurate. The tax cut could be as much as $230 million, tax experts said.

The deal looked dead, with Huntsman, who is not up for re-election this year, saying he'd just wait for the 2007 Legislature.

House Republicans, however, didn't give up. They signed a letter asking Huntsman to call a special session to just cut the top rate of the current system a bit to give the $70 million tax cut — and reform could wait a year or so.

But Huntsman said he knows if he just gives a small rate reduction, he'll never get his personal income tax reform he wants through later.

House Majority Whip Steve Urquhart, R-St. George, said Wednesday it is not assured that the House would vote for the new dual tax system package.

"Tax reform may sound sexy, but it is not necessary," said Urquhart. "What we need this year is a tax cut — drop the top rate a bit. Our current tax system is good, except that it takes too much money" from taxpayers.