Tax-cut proposals jump a big hurdle

Paying your taxes next year could be a very different experience if just three of the two dozen or so tax-reform items coming before the 2006 Legislature pass.

A final hurdle was jumped Wednesday when a legislative committee heard — and passed on to the 2006 Legislature — a number of recommended reforms and tax reductions.

These include:

• A new, flat-rate income tax of 4.8 percent that all taxpayers, except the lower income, would pay.

• A single sales-tax rate of 6.4 percent assessed uniformly throughout the state.

• No sales tax placed on unprepared food.

Much work remains before any of the specific bills and/or tax-reform ideas heard before the Interim Revenue and Taxation Committee of the Legislature can become law in the 2006 general session, which starts Monday, Republican and Democratic leaders say.

During the next 45 days more than two dozen tax bills will be debated, changed and honed, said Sen. Curt Bramble, R-Provo, co-chairman of the committee.

Not all will pass, but with legislators facing $1 billion in new one-time surpluses and ongoing tax revenue, now is the time the state can afford tax reform, said Rep. Greg Hughes, R-Draper, a member of this year's Tax Reform Task Force.

Some of the proposed changes, by state taxation standards, would be radical.

A bill by Rep. John Dougall, R-American Fork, includes removing the sales tax from food and — a variation of Gov. Jon Huntsman Jr.'s personal income tax recommendation — a 4.8 percent tax rate for all.

Combining that rate reduction (the current top rate, which most pay, is 7 percent) with removing the food tax would mean a tax cut for three-fourths of Utahns, new numbers released Wednesday show. About a fifth of taxpayers would see no change in their tax payments, while a smaller group — more likely those who don't give to charities or have a home mortgage — may see slight tax hikes.

Giving all Utahns at least a $300 household credit, as Dougall's bill would do, would mean that even renters and older Utahns who have paid off their home mortgages would get a tax break aimed at encouraging homeownership, legislators were told.

In order for state government to grab an estimated $260 million in uncollected, but due, sales tax on items purchased out-of-state via catalogues or the Internet, Utah must adopt a single sales-tax-rate system.