Going to a true flat-rate system will allow that top rate to be cut to around 4 percent and the savings to all taxpayers in money, simplicity and understanding of the income tax system makes up for doing away with the deductions, Cornia and other Walker tax study members said.
The problem, of course, is one of citizen understanding and political impacts.
"Remember," said Utah State Tax Commission member Bruce Johnson, who also sat on the Walker panel, "you would still get the deductions on your federal income tax returns" you just wouldn't get them on your state returns.
Broadening the state sales-tax base to include personal services like haircuts and lawn care and health-care bills would also allow the sales tax rate to be lowered, the experts said.
Paying the sales tax on most services would allow the state's current rate of 4.75 percent to be cut to 3.75 percent, the Walker panel said.
Finally, after the Walker panel noted that low-income Utahns would be exempt from a flat-rate income tax as they
are under the current system, task force member Rep. John Dougall, R-Highland, asked why low-income Utahns should avoid paying "even a small tax." "Aren't we making a welfare program part of a tax system?" he said.
Perhaps, the experts said.
But under the current state tax system, said Johnson, why is it proper that his well-to-do neighbors pay $100 a month to have their lawn cut, paying no sales tax on that service, when the single mother down the street has to pay a sales tax on the milk for her children or a sales tax on tennis shoes so her children can go to school?
Meanwhile, members of the task force's subcommittee on income taxes decided Thursday to get started by having staff come up with a flat rate calculated on gross income if the first $20,000 or so of earnings were exempted.
The calculation won't take into account deductions for charitable contributions, and would be revenue neutral, bringing in as much money as the current income tax structure does now rather than cutting income tax collections.
"My preference is we have a tax cut and that cut come out of personal income," said House Majority Whip Steve Urquhart, R-St. George, who proposed coming up with the calculation. But the entire Legislature should make that decision, he said, not the subcommittee.
Exempting what Utahns need for subsistence from income tax $20,000 for individuals and $40,000 for a couple may alleviate the need to take the sales tax off food, said Sen. Howard Stephenson, R-Draper, the subcommittee chairman.
While subcommittee members agreed they want a flat tax rate, several said they are willing to discuss including deductions for charitable contributions and other expenses before coming up with a final recommendation."I'm looking for simplicity," Urquhart said.
Contributing: Lisa Riley Roche and Josh Loftin
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