From Deseret News archives:

5% single-rate tax likely

Published: Friday, Feb. 23, 2007 11:59 a.m. MST
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"This is the governor's No. 1 item to get passed this session, and it's hard to deal with changing that, other than just say no," said Harper after Curtis and other House GOP leaders briefed the 50-member caucus Thursday.

House Minority Leader Ralph Becker, D-Salt Lake, said Democrats had not been briefed on Huntsman's new ideas and so couldn't make a reasoned comment. Senate Democrats, too, learned of the proposal only after it was debated by the Senate GOP caucus.

In fact, the last-minute chase to get some kind of flatter-rate tax system this session is bothering some longtime legislators, who have some familiarity with taxes.

A year ago, lawmakers failed to pass a last-minute tax proposal that turned out to contain massive errors. Since then, legislative staff have been given access to tax information needed to figure out the financial impact of such proposals.

"I believe there's time to get the numbers right," Valentine said, although he added that calculations were still being made about how the new proposal would affect various income levels.

Indeed, Curtis talked to his caucus off of notes written on three small sheets of scrap paper. "Basically, I was winging it," Curtis said after the caucus voted 30-15 to support the new single-rate income tax plan.

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Assuming the new income tax plan is acceptable to majorities in the House and Senate, another $110 million in further tax cuts is left to be decided. (Both House and Senate GOP caucuses decided earlier to give $220 million in tax cuts this year.)

That last $110 million will likely come in sales tax reductions — either a general tax reduction, a food tax reduction or some combination of both — and $20 million or so in business tax cuts.

While Huntsman's latest income tax plan has only one, single-digit rate, House Republicans aren't calling it a flat-tax system.

"There really is not a whole lot of difference" in the final tax impacts between the current multi-deduction, multi-tax bracket system and a new 5 percent system, said Curtis.

The largest changes are the lower tax rate — which Huntsman wants for economic development — and replacing a deduction-based system, in which income is lowered through deductions before a tax rate is applied, with a credit-based system, where the tax rate is applied to an Adjusted Gross Income (AGI) and then tax credits are subtracted from the tax bill.

It's those credits that are causing sleepless nights for fiscal analysts. Valentine said they're trying to come up with a plan to give lower-income taxpayers a larger credit that phases out as earnings rise that will ensure the price tag for the new plan stays at $110 million.

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