Tax plan dead, guv says

Gov. Jon Huntsman Jr. said Tuesday he quietly abandoned his "unworkable" income tax reform plan more than a month ago — and now is leaning toward giving Utahns the choice to pay taxes based on a simple flat rate.

The governor also said he'll add an item to the agenda of the May 24 special legislative session to give his office and the legislative fiscal analyst access to Tax Commission data to prevent a repeat of the errors that doomed his plan.

Now that yet another mistake has surfaced in the price tag for his complicated plan to reduce income tax rates while eliminating most deductions, Huntsman acknowledged the plan has been dead for some time.

"As soon as I discovered the initial error . . . when I saw that flaw, I jettisoned it," the governor told the Deseret Morning News. "I wasn't willing to pay beyond $70 million. In my own mind, it was unworkable."

It was a decision, however, that the governor kept to himself even when he canceled a planned special session of the Legislature on tax reform shortly after announcing the initial error in mid-April.

Lawmakers have been frustrated, especially since most are up for re-election in November and would like to be able to give their constituents a tax break. They had a chance during the 2005 Legislature, but the governor's plan stalled in the House in the final hours of the session.

Their response has been to start talking about a so-called dual tax plan, that would allow taxpayers to choose between continuing to pay their state income taxes under the current system or using a simple flat rate to figure out what they owe.

The difference between that and the governor's original plan, known as H3, is that the rate would drop to 4.8 percent under the flat-tax option, and taxpayers would not be allowed to take any deductions.

Huntsman had proposed lowering the top rate of 7 percent that most Utahns now pay to just under 5 percent while retaining at least a portion of some deductions including charitable contributions and mortgage payments.

"I think it has some allure," Huntsman said of the dual plan. Still, he isn't in any hurry to deal with a tax cut, even though the $70 million set aside for his original plan is still on the table. The governor said no action may be taken before next January.

"Tax reform is still something I want to achieve," Huntsman said. "We're not going to hold ourselves to any time line in particular. If it's the next legislative session, it's the next legislative session."