Utahns' tax cut may grow

One of the great battles of the 2006 Legislature, whether to adopt a "flatter-rate" state income tax, is taking shape — and the tax cut is getting larger — according to details released Tuesday by House and Senate sponsors.

"We've decided to go a little bigger" on the tax-cut side, said Rep. John Dougall, the House sponsor of HB354.

The measure he detailed to the Deseret Morning News — a 4.9 percent rate with various tax credits — would overall be a $40 million to $60 million tax cut.

Earlier versions of the so-called "H3" measure — which is supported by Gov. Jon Huntsman Jr. and a number of senators and representatives — would have cut taxes by $17 million to $23 million.

Legislators and Huntsman have more than $1 billion in one-time and new tax revenue growth and anticipate even higher revenue estimates next week.

House Republicans want a $230 million tax cut, Senate Republicans favor a $100 million tax cut, and Huntsman called for a $60 million tax cut in his recommended 2006-07 budget.

Most Utahns currently fall into the highest personal income tax bracket, paying 7 percent on earnings above $8,600 a year.

While Huntsman and legislative leaders have been talking for nine months about "reforming" the state income tax to make it simpler and flatter, there is now talk in both the House and Senate of dumping reform and just lowering the rates in the current tax system.

But Mike Mower, Huntsman's deputy chief of staff, said now that H3 is out, it can be explained and support will build. Mower doesn't think that the governor's income tax reform is in trouble.

Dougall says the biggest battle over whether to adopt "reform" or just cut taxes through lowering current rates will take place in the House.

"I think the Senate is more amenable to H3," he said. The nickname for the bill comes from it being the third variation on a flat income plan suggested by Huntsman and endorsed by the Tax Reform Task Force last year.

A per-person income analysis of the new H3 obtained by the Deseret Morning News shows that because of the overall $60 million given in tax cuts, most Utahns would see an income tax cut.

However, several different categories of taxpayers would pay more, the analysis shows. By and large, singles or bigger families heavily in debt through their mortgages and/or second mortgages would appear to pay more, while singles and smaller families who make charitable contributions would see tax breaks.