From Deseret News archives:
Income-tax cut may not help middle-class Utahns
SB223, sponsored by freshman Sen. Wayne Niederhauser, R-Sandy, passed the Senate Revenue and Taxation Committee unanimously.
However, in an open caucus last week, House Republicans ripped the bill, one representative saying that upper middle-income Utah families would be "taking it in the shorts" because SB223 doesn't help them much.
Indeed, when one senator asked who wouldn't make out well under SB223, a legislative staffer said that upper middle-income families with a large number of children, paying significant mortgage interest each year and contributing a lot of money to charities (like their church) would be left out of "tax reform" and would stay in the current multi-deduction state personal income tax system.
But Robert Spendlove, an economist in Huntsman's budget office, told the Senate committee that Huntsman likes SB223, in part, because through its lower tax rate, tax credits and per-person credits, 80 percent of all Utah taxpayers would pick the new flat-rate income tax system over the current multi-deduction system.
No one would actually pay more state personal income tax. "There are no winners or losers in this," Spendlove said.
Still, the question remains: Who would be getting a fairly big proportional tax cut in 2007 and who would be getting just a small tax reduction?
Spendlove said SB223 is geared to help low-to-middle-income people the most. However, top executives making big salaries would also be helped because their top tax rate under the current system (6.98 percent) would drop to 5 percent under the flat-rate tax option.
"This moves us much closer to a tax system that is more attractive, that is good for economic development and will attract more business decisionmakers" to Utah, said Spendlove.
It appears, however, that big LDS families carrying a large mortgage would not be getting much tax reduction under SB223 — and that has some House Republicans balking at Huntsman's new income tax plan.
In addition, LDS Church leaders have said that whatever personal income tax changes are made, there should still be incentives for charitable giving. If SB223 really would move 80 percent of Utahns into the flat-rate tax system — that has no deduction for charitable giving — then only 20 percent of tax filers would be under the old tax system, which gives charitable deductions.
