Tax-cut plan slammed

A $110 million income tax reduction plan floated by GOP Gov. Jon Huntsman Jr. and liked by a number of GOP senators hit the rocks Thursday in the House Republican caucus.

After parts of Huntsman's plans — embodied in SB223 sponsored by Sen. Wayne Niederhauser, R-Sandy — were roundly criticized by a number of House Republicans, GOP leaders said they would continue working out compromises with Huntsman and senators.

The governor's plan is a continuation of a new flat-rate income tax system pushed through a summer special legislative session, said Rep. Jim Dunnigan, R-Taylorsville, only worse.

"The upper- and lower-income residents get most" of the tax relief, he said. "The upper middle class took it in the shorts (with last year's flat-rate tax plan), and it's the same with this one."

As the upper-middle-income taxpayers "keep taking it in the shorts, they're not going to have any shorts left," he said.

No one would see a tax hike under SB223 and other income tax bills, but some groups of taxpayers would see less of a percent reduction than others.

Where are the good policy decisions reflected in Huntsman's new idea? Dunnigan asked. Looking through three different pages of complicated tax changes, he added: "Where is this simpler and easier" for tax filers?

Several other Republicans said Utah's current tax system, with a number of deductions and exemptions — like for mortgage interest and charitable giving — has worked pretty well for 80 years.

"It is generating a lot of revenues for education," said Rep. Kory Holdaway, R-Taylorsville.

House Majority Leader Dave Clark, R-Santa Clara, said SB223 provided so many tax advantages to various income groups that 80 percent of Utah taxpayers would move over to the new flat-rate system in 2007. With a flat-tax rate of 5 percent, that would make Utah more competitive with surrounding western states and stimulate Utah's economy, goes the governor's thinking, he added.

But, said Rep. Steve Mascaro, R-West Jordan, the effective tax rate of most Utahns is 5 percent now under the old personal income tax system.

Rep. Wayne Harper, R-West Jordan, a leader in tax reform who has carried legislative water for Huntsman before, said he would have nothing to do with SB223.

"This is 180 degrees away from a real fairer, flatter income tax," Harper said, using the catch phrase that Huntsman has often used in asking for a flat-rate tax alternative.