Surplus helps tax plan

Some conservatives in the Utah Legislature say it makes little sense to give a $70 million income tax cut in Tuesday's special session and then allow voters to raise their own sales taxes by as much as $110 million next year for transportation projects.

"It's two steps forward, one step back" in overall tax cutting and slowing the growth of government, says Rep. Greg Hughes, R-Draper. Another tax cut should be given in the 2007 Legislature to off-set any sales-tax hikes, he says.

Hughes and other conservatives may have an ally in Gov. Jon Huntsman Jr., who has voiced his desire to look at cutting taxes again. Lawmakers are meeting next week to consider a $70 million income tax reduction, and allow the state or counties to increase sales taxes to fund transportation improvements.

And those pushing for further tax reductions got a boost to their cause Wednesday, when state auditors announced the state ended last fiscal year June 30 with a $380 million tax surplus, not the $351 million originally estimated.

Hughes, chairman of the Conservative Caucus in the House, a group that advocates lower taxes and less government spending, believes it's OK to vote for Gov. Jon Huntsman's "dual track" income tax system in the Sept. 19 special session.

And he says it also makes sense next week to adopt a new law that would allow citizens to vote for a quarter-cent sales tax hike for new roads, transit and airports.

But in the 2007 general session, says Hughes, lawmakers should then cut taxes again "to make revenue neutral whatever sales tax (hike) is approved."

In other words, if the sales tax in Salt Lake County goes up by $50 million (a quarter-cent increase) to pay for new TRAX extensions, another state tax should be cut by $50 million.

If across the state the sales tax is raised by a quarter-cent, bringing in $110 million for roads, transit and airports, then a tax should be cut by $110 million, explained Hughes.

Hughes personally likes the idea of lowering the new flat-rate income tax rate of 5.35 percent to around 5 percent — or whatever level keeps new tax revenues equal to tax cuts.

Lending their voice to the tax-cut/government spending debate, legislative Democrats held a press conference Wednesday to say that growing tax revenue should equate to more than just greater tax cuts. Public and higher education need, and deserve, more funding, they said.

"There is a lot of interest among a number of us to make any tax hikes revenue neutral," said Hughes. "We wouldn't act in the special session" on tax cuts greater than the already-agreed-upon $70 million, he said, because legislators won't know until November's ballot if citizens will approve any sales tax increases.