No 'easy solution' on tax base

A legislative task force considering changes to Utah's corporate taxes — such as eliminating the corporate income tax — has its hands full, according to one expert who addressed the group Monday.

Gary Cornia, professor of public management at the Romney Institute of Public Management at Brigham Young University, told the Individual Income Tax and Corporate Franchise and Income Tax Task Force that changing elements of the tax base could put Utah at a disadvantage with other states.

"I don't see any easy solution around the base of the state corporate income tax," said Cornia, one of several people studying corporate income taxes. "Dealing with the base, I don't see anything we could do that would easily solve our problems without putting us at a distinct competitive disadvantage or political disadvantage with other states."

Cornia and others spoke of what could happen if changes to the base or rate were to occur, but each had disadvantages, including trying to find ways to make up for the lost corporate tax revenue.

"Now, I'm not one who has to find the millions and millions of dollars if we did that . . . but if I were you, I would think of another committee to serve on, because this is one that's going to cause a lot of frustration. There are no easy answers to any of this stuff."

Keith Prescott, chairman of the Utah Tax Review Commission and former chairman of the Corporate Tax Task Force during the early 1990s, also said changing rates could put Utah at a competitive disadvantage, "either in actual or psychological terms."

"Then you have economic base going out of the state instead of into the state," he said. "We just can't afford to do that with the problems that this state is facing."

Forty-five states have a corporate income tax, but between 1980 and 2002, the percentage of that tax as a portion of all state tax revenue fell from 9.65 percent to 4.84 percent as corporations found ways around paying the tax, Cornia said.

"The outcome of that is a tax that we believe, and many people believe, has serious problems in terms of its viability. Maybe 'viability' is too strong a word, but clearly it has serious problems," Cornia said.

Sen. John W. Hickman, R-St. George, said the corporate franchise tax today "is really kind of a dinosaur."