Task force OKs $36 million in tax cuts

Veiled by all the debate over a flat-rate income tax and huge state revenue surpluses are two tax-cutting recommendations which would otherwise be headline-grabbers: a $32.6 million cut to Utah businesses and a $3.4 million cut for the state's two largest electrical utilities.

Last week, before the 15-member Tax Reform Task Force took up Gov. Jon Huntsman Jr.'s "flatter" personal income tax proposal, the group quickly and unanimously adopted the two tax cuts.

At nearly $33 million, the "electable sales factor" proposal would be the largest tax cut for Utah businesses in years if the 2006 Legislature goes along with the task force's recommendation.

The $3.4 million tax cut for Utah Power and the Intermountain Power Agency must be passed on to ratepayers, the recommendation says — so it would be effectively a reduction in monthly utility rates for millions of Utahns.

Utah Power is the largest private provider of power in the state, while the nonprofit IPA provides power to numerous municipally owned utilities across the state and in Southern California.

One of the early goals of the task force — begrudgingly agreed to by some conservatives on the panel, made up of legislators and members of Huntsman's staff — was to not raise or cut taxes across the board but adopt revenue-neutral reforms.

"These two issues cost money," Rep. Roz McGee, D-Salt Lake, reminded her task force colleagues after the votes. "So we need to find a way to keep overall revenue neutrality."

But after the state brought in around $400 million more in taxes last fiscal year than lawmakers originally budgeted for in 2004, more and more legislative leaders are talking about tax cuts in 2006. And it only makes sense to make those cuts as part of the reform effort, they say.

As part of his economic development plan, Huntsman asked the 2005 Legislature to phase out the current 5 percent corporate income tax. But that would cost the state around $200 million at the end of the seven-year phase out — money earmarked for public and higher education.

It also would have given tax breaks to huge corporations who may do some business in the state, but employ few or no Utahns. Legislators refused Huntsman's request.

Instead, Sen. Howard Stephenson, R-Draper, president of the Utah Taxpayers Association and a task force member, pushed for changing the way Utah-based firms pay corporate income taxes.