Tied House vote kills business tax-cut plan

One of the key business tax-cut proposals endorsed by the Tax Reform Task Force failed to pass the House Tuesday in a vote that was as much against the task force as it was against the bill.

The corporate income tax restructuring contained in HB53, which failed in the House of Representatives on a 37-37 tie vote, would have allowed in-state businesses to use a "single sales factor" formula for determining their taxes.

That way, Utah-based businesses would only pay taxes based on sales, while out-of-state businesses would pay based on a combination of sales, property value and wages. The resulting cut for those in-state businesses would have been an estimated $13 million for fiscal year 2007 and $31 million in fiscal year 2008, which would be the first full year it was collected.

The bill's sponsor, Rep. Wayne Harper, R-West Jordan, said that the tax cut would have actually benefited Utah because it would have rewarded companies who centered their business in the state, thereby creating jobs. The cuts, in essence, would spur economic development in the state.

"We want to encourage businesses who have employees here and export products," Harper said. "We should give them the ability to choose which kind of tax formula they want to use."

Opponents of the bill were concerned about the loss in state income tax, which funds education. But they were also bothered by the lack of focus in the package of tax bills forwarded by the Tax Reform Task Force, which met almost weekly during the summer and fall of last year.

"We authorized the task force to come forward with some tax recommendations, but I think the task force punted, and decided to leave it up to the will of the body," said Rep. Kory Holdaway, R-Taylorsville, who voted against the bill. "There are not specific recommendations that this body can embrace or wrap their arms around. Now we're dealing with these issues piecemeal. We don't have the whole picture."

Additionally, some of the biggest tax reform proposals, including the "flatter" tax, have yet to even be made public, Rep. Roz McGee, D-Salt Lake, said. And another major tax reform proposal, the House leadership plan to remove the sales tax from food, was brought to the task force near its last meetings and barely considered before being sent to the full Legislature.

The House approved the $160 million elimination of the sales tax on food.

McGee, who was a member of the task force, supported the single sales factor proposal by the task force, but only because she thought it would be one of the things the task force would consider for inclusion in its final, pared-down proposal. She voted against the bill Tuesday.

"I was hopeful that we would be coming forward with a major package," McGee said about the task force. "But I have yet to even see one of the biggest proposals we discussed."

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E-mail: jloftin@desnews.com