Gov. Jon Huntsman Jr. said Wednesday he won't call a special session to deal with his proposed income tax reform plan because the $70 million price tag is actually 50 percent higher.
During a hastily called press conference, Huntsman did not rule out bringing back the tax cut that the 2006 Legislature failed to pass, despite questions raised by what he described as an error in the way the plan's fiscal note was calculated.
"This means that, being up-front and honest with the people of this state, we're going to take a
look at the numbers once again. We're going to put off, at least for the time being, a need for the special session" that had been planned for mid-May, the governor said.
"We're going to ensure that all parties are comfortable and confident," he said, adding he wasn't willing to put Utahns "through a special session on something this important unless we are totally confident in the underlying numbers. . . . We want to make sure it is done right."
That could mean waiting until the 2007 Legislature convenes next January, a possibility that seemed to surprise legislative leaders.
"Fiscal notes are not an exact science," said House Speaker Greg Curtis, R-Sandy. "I'm an optimist, and I think we can work through this. I don't think that anybody will see a loss of trust."
Senate President John Valentine, R-Orem, said the announcement that there would be no special session caught him "flat-footed." Valentine said he doesn't see how the error significantly changes the basic issues of the debate.
"It would be the same core proposal, only with slightly different numbers," Valentine said. He warned that some Senate Republicans who supported the tax plan may feel betrayed. "It is something I would have to take to my caucus," Valentine said.
Sen. Curt Bramble, R-Orem, said he expected the GOP caucus would agree to postponing action on the plan until 2007, especially since it is intended to have impact on the state for a few decades.
"We need to close the deal," said Bramble, who led the charge for tax reform in the Senate. "But with the mistakes, it's prudent to cancel the special session. It would not be good policy to ramrod something like this through."
Huntsman had hoped to have the tax cut in place by the start of the new budget year July 1. Earlier this year, lawmakers set aside $70 million for income tax cuts, the result of a budget compromise between the governor, the House and the Senate.
What they couldn't agree on before adjourning in March was what form the income tax cut should take. Huntsman wanted the top tax rate lowered from 7 percent to about 5 percent, and most deductions eliminated to create what he termed a "fairer, flatter" tax.
The Senate was ready to go along with that plan, but the House stalled the tax cut in the final minutes of the session. Opponents complained the plan was too complicated and that they hadn't had enough time to consider it.
So the governor said he'd wait until May to call lawmakers back into special session to vote on the plan.
Wednesday, Huntsman said he remained committed to tax reform. "It is critically needed on the income side, to make our state more competitive and to secure the base for longer-term funding for public education," he said.
The $70 million set aside for the tax cut, the governor said, "remains on the table" for that purpose.
Just how the plan ended up actually costing about $105 million $35 million above the impact on state budget that was calculated by the Legislature's fiscal analyst's office is not entirely clear.
According to the head of the fiscal analyst's office, John Massey, the problem was in data supplied by the Utah State Tax Commission. "It's frustrating," Massey said of the error in the fiscal note. "But we sign it, and we take responsibility for it."
He said his office is looking at ways to prevent similar problems in the future.
Charlie Roberts, tax commission spokesman, said the commission is "in the process of getting together, gathering information and evaluating the situation."
The governor and others said the error, discovered within the past week, happened because the calculations did not take into account the credit that Utahns receive for taxes they pay to other states for income earned there.
Huntsman said the "brain trust" of experts he tapped to come up with the plan also relied on those same, apparently faulty, numbers. The size of the proposed plan was changed a number of times throughout the session.The governor declined to say whether any other issues would require a special session of the Legislature. He has said, however, that there are some technical corrections that need to be made to the budget before July 1.