Flat tax could be tough to sell to Utahns

Pignanelli: "Booze, gambling and flat taxes!" is my consistent response to inquiries regarding LDS Church involvement in the legislative process. In 1987, I witnessed firsthand how House passage of a flat income tax bill generated a statement from the church expressing concern over the elimination of charitable deductions. The legislation soon died. Not much happened with this concept until last year, when Gov. Olene Walker suggested a flat income tax and breathed new life to the endeavor. In reaction, the church again reiterated its noble support of deductions for charitable contributions. But this didn't stop the Tax Reform Task Force Subcommittee from recommending the adoption of a pure flat-tax structure without any religious, charitable or mortgage interest deductions. There are now bold whispers at the Capitol among officials that they may disregard, or attempt to change, the LDS Church's position.

Obviously, the few political statements from the LDS Church carry significant weight. Any attempt to counter this institution better have strong popular support — and this is where the politics behind the flat tax is weird. There is no hue and cry across the land to simplify state income taxes (although everyone wants the federal mess corrected). Dreams of a state income tax form on a postcard seem silly since the current form is two pages long with enough room for taxpayers to make various donations. More important, in terms of public policy the church is dead right. The subcommittee scheme is a real nasty piece of work that imposes new taxes on indigent families but provides significant relief to millionaires. Undoubtedly, in reaction to the church and other charities, future discussions will focus on deductions.

Soon the task force will deal with the Big Enchilada: fulfilling the governor's ambitious promise to eliminate corporate income taxes, which generate $180 million — mostly from out-of-state corporations. The hope of increased economic development will not dampen the guaranteed firestorm of controversy when this is rolled out. The governor and the Legislature know they can eliminate corporate taxes only if they satisfy Utahns with other tax adjustments that do not generate significant opposition. The flat tax is too controversial with powerful interests, and GOP officials would be wise to examine a better alternative, the Jones-Mascaro tax-reform package.