From Deseret News archives:
New year brings tax cuts, smoking restrictions
Almost a half-dozen tax cuts, including two major parts of the ongoing tax reform by state leaders, are among the dozen laws that kick in today. Most of the changes are revisions to existing laws or the tax code, with only one law — a requirement that public schools create a "unique student identifier" that does not include the student's Social Security number or birth date — actually being new.
The most noticeable change for most Utahns will be the reduction of the state's portion of the sales tax on food, from 4.75 percent to 2.75 percent. It is expected the change will save $70 million statewide.
Figuring out the tax, however, will not be as simple as cutting 2 percent from the grocery tally because of very specific definitions about what is taxed as food. Essentially, it will only apply to unprepared food, and not to non-food items or prepared food purchased from the store deli or from restaurants.
Grocery stores, especially smaller operations, could face some difficulties changing their systems to accommodate the new categories for sales taxes. To help them with the shift, the state appropriated $6 million during the last session.
Whether the remaining 2.75 percent will be removed this year, next year or ever has not been decided. The House Republicans support a $300 million tax cut during the upcoming General Session which could include a further reduction of the sales tax on food, but Gov. Jon Huntsman Jr. and Senate Republicans have so far opposed pursuing it this year.
The 2 percent reduction was part of a three-pronged plan approved by the Legislature last year. A second part of that plan, an optional 5.35 percent flat income tax, will also become available to taxpayers in 2007.
Under the plan, a taxpayer could pay the flat tax, which has no deduction, or continue paying the 7 percent income tax that allows for deductions, especially charitable giving or mortgage interest.
Huntsman has proposed lowering the flat tax rate further in his 2007 budget. By doing so, he hopes to convince more taxpayers than the expected 5 percent or 10 percent that it would help at its current rate to utilize the option.
Other tax revisions will help more specific groups of people:
• Taxpayers older than 65 with an income of less than $27,000 will be able to claim homeowner or rental tax credits that could amount to as much as $798.
• Owners of sailboats and canoes will also see their property tax bills reduced after tax changes passed last year were revised; those types of watercraft are not taxed at the same rate as far more expensive cabin cruisers.
• Business owners will no longer have to account for every piece of personal property because of a new law and a constitutional amendment that exempts property of minimal value, such as chairs.
• Truth in Taxation notices will be more clear by requiring that the average percentage of increase is included.
• Rental car companies can register their vehicles for six months, instead of a year, the first time they register them.
No-smoking laws will also be expanded, as country clubs, private dining establishments and fraternal organizations will become smoke-free. In 2009, taverns and bars will also be forced to ban smoking, making smoking indoors illegal almost everywhere outside of private residences.
E-mail: jloftin@desnews.com
