Tax-reform battle is on hold but not over yet

Pignanelli: The big gust of wind you felt 10 days ago was not a return of winter storms. It was actually a huge sigh of relief exhaled by politicos on Capitol Hill upon learning of the $35 million calculating error in Gov. Jon Huntsman Jr.'s flat tax plan. The governor has staked out a strong position that a 5 percent flat tax is a crucial part of his economic development program but canceled the special session with a stated reason that more time was needed to deal with the new cost estimates.

Many lawmakers (and some executive branch officials) are grateful for the miscalculations — it provides a face-saving reprieve from a special session that was doomed to fail. There are not enough votes in the House for the flat tax proposal. To his credit, the governor refuses to retreat. Many senators are aching for the opportunity to force the House to deal with the issue under public scrutiny, and conservative representatives will not concede to the Senate. Legislators opposed to the flat tax are not anxious to contradict the popular chief executive. Thus, a postponement of the threatened showdown — which would have metamorphosed into another stalemate — rescued Republicans from embarrassment. A prominent representative joked he will sponsor a resolution praising the Utah Tax Commission for a logistical blunder that saved taxpayers from a costly legislative gathering.

However, the cancellation begs several important questions. The state is enjoying a huge budget surplus, and can legislators enter the election season with only a small reduction in the sales tax? "A deal is a deal" and will the commitment to remove $70 million from income tax collections be honored? Is there an alternative to the flat tax?

For years, Utah's tax gurus have been advocating an income tax without deductions for the "simple purity" such a system offers. The governor wants to use the lower rate as an inducement for relocating businesses to the state. Polls consistently conclude the public supports such a concept. Yet, key legislators are not persuaded — constituents may answer pollsters with supportive responses but are not expressing similar thoughts to their elected representatives. Thus, many lawmakers believe an overall cut in the tax rate is reflective of public sentiment and a superior policy.