Walker proposes sweeping tax reform

Outgoing Gov. Olene Walker proposed a sweeping series of changes to Utah's tax structure Monday, including a flat-rate income tax and charging sales taxes on consumer services such as health care.

Deseret Morning News graphic Tax-reform proposal Requires Adobe Acrobat.

"The bottom line is to broaden the base and lower the rate," Walker said, calling her proposal friendly to both families and businesses in the state even though property taxes would have to go up by some $300 million to offset rate cuts in income and sales taxes.

Overall, the state's tax take would stay the same, says Walker, but the tax system would be fairer and more stable. She stressed that if something isn't done about the state's dwindling tax base, Utah will face a $200 million revenue shortfall within a decade.

"The critical, critical question is, can we afford to do nothing," the governor said.

Under her plan, the state income tax rate would drop from a high of 7 percent to a flat 4.9 percent for everyone under the most likely alternative.

The state sales tax rate would be rolled back 1 percentage point, to 3.75 percent, but eliminated from many business purchases and charged for many consumer services.

Other changes sought by the governor include eventually eliminating the corporate income tax, allowing school and other special districts to adjust property taxes for inflation without holding truth-in-taxation hearings and equalizing the sales-tax rate throughout the state.

Details of the proposal are contained in an inch-thick volume titled "Governor Olene Walker's Recommendations on a Tax Structure for Utah's Future," available online at www.utah.gov/governor.

Walker's proposal would need legislative approval to take effect, and she'll only be in office a few more weeks. Lawmakers were not invited to join the governor's task force on tax reform. Several said Monday the exclusion could doom the proposal.

Gov.-elect Jon Huntsman Jr., who has adopted tax reform as his top priority and key to his economic development effort, declined Monday to comment directly on the proposed changes and cancelled a planned press conference on the topic.

"Tax reform is critical to Utah," Huntsman said in a statement. "As we work to revitalize the economy, we need to revamp our outdated tax codes and close the loopholes of the past."

The new governor is expected to spend some time sorting out what lawmakers would be willing to consider when the 2005 Legislature convenes in mid-January before he responds to Walker's proposal.

Reaction was mixed to Walker's recommended changes.