House panel to study competing state tax plans

Who should pay more Utah state income tax — those who have several school-age children or those who have a few? Or who should pay less — the poorest among us or the richest?

Two very different, but far-reaching, state income tax bills will be heard this morning in the Utah House.

And while neither may pass this session, and instead be bundled with a dozen other tax-reform ideas to be considered in a much-anticipated tax task force, the bills reflect how some lawmakers believe Utah's income tax code is in dire need of reform.

Rep. Wayne Harper's HB101, a bill that would place a flat income tax rate of 5.9 percent on all residents, and Substitute HB197, the "Jones-Mascaro" bill that includes limiting per-child tax deductions, will be heard in the House Revenue and Taxation Committee.

Harper, R-West Jordan, who is becoming the House's tax expert, says he doubts HB101 will pass this session. "But it will be part of the tax reform task force. We need to get the idea of a flat-rate tax out there to start the public debate and get good input."

Reps. Pat Jones, D-Cottonwood Heights, and Steve Mascaro, R-West Jordan, have had their bill in one form or another before House members three years in a row. They believe that citizens will support the concept once they understand it.

Basically, Substitute HB197 limits child deductions, making households of more than five pay more into the state's public education system. It also expands tax brackets to benefit moderate-sized, low- and middle-income families, and eliminates a deduction for federal taxes paid.

The bill, which in past years sought to raise millions for schools, is revenue-neutral. But it would increase school funds more quickly in the future, the sponsors say.

Harper touts a flat-rate tax throughout the personal income tax code as "simple and fair." An interim study committee looked at the issue last summer.

There are problems with a flat-rate tax, Harper admits. It can lead to "a major tax shift" from higher income people to lower-income families.

For example, a family of four that makes charitable contributions, holds a home mortgage and makes $25,000 a year could see a state tax hike of between $350 and $450 a year.

While a family of four, likewise taking charitable contributions and home mortgage deductions and making $500,000 a year, would see a state tax cut of between $6,000 and $6,500.