From Deseret News archives:

5% single-rate tax likely

Published: Friday, Feb. 23, 2007 11:59 a.m. MST
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Several Republicans complained that Huntsman's plan certainly isn't any simpler than the current system and may be more volatile — with larger swings between surplus revenues and revenue shortfalls depending on fluctuations in Utah's economy.

A few GOP lawmakers were also concerned about what the mortgage industry would think of the new tax plan and how LDS Church officials would respond to it.

More than a year ago, leaders of The Church of Jesus Christ of Latter-day Saints said that any tax reform in Utah should keep the charitable deduction in place.

After a further-reformed Huntsman plan that didn't give direct deductions for charitable giving was introduced at the first of the 2007 Legislature, the Deseret Morning News asked church public relations officials if church leaders' stand had changed — considering that the alternative didn't give direct deductions for charitable giving.

Church leaders just reiterated their previous warnings, but didn't oppose the plan.

The plan presented Thursday does include home mortgage interest and charitable giving in a "tax credit" formula.

A person's tax credit would be 6 percent of either the standard federal deduction or 6 percent of the itemized deductions.

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And GOP House leaders said that as best as they can tell from modeling done by Huntsman economists, a family with large charitable giving should be slightly better off under Huntsman's new plan than under the current deduction-based income tax system.

As is now the case, however, a family would have to itemize its returns, and not take standard deductions, to get the most benefit out of mortgage interest paid and charitable giving.

For those "purists" in the House GOP who really wanted a flat-rate based income tax system, Huntsman's new plan kills that opportunity.

But, said Curtis, to just lower a true flat rate tax system to 5 percent would take $500 million out of the state's public/higher educations budgets and give by far most of that huge tax cut to higher-income Utahns — something no one really wants to do.

Through his latest plan, Huntsman gets a 5 percent rate — a two-year goal of the governor who says that rate makes Utah competitive with surrounding states' top income tax rates.

Valentine said there's still an "elegance" to the new proposal, because it recognizes larger families and preserves credit for mortgage deductions and charitable contribution, although the credit phases out depending on income level and filing status.

Not all are sold, however.

"Phasing out the tax credits," said Rep. Jim Dunnigan, R-Taylorsville, "completely changes the ball game." Middle-income Utahns would not see the same percentage of income tax cuts as some other groups, he maintained.

Huntsman's earlier income tax plan would result in middle-income Utahns "taking it in the shorts" because they wouldn't get much tax relief, Dunnigan said several weeks ago.

A chart accompanying Thursday's discussions shows that on average, a family making $40,000 a year would get a $100 tax cut while a family making $100,000 a year would get a $200 tax cut.


E-mail: bbjr@desnews.com; lisa@desnews.com

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