Gov. Jon Huntsman Jr. signed the $220 million tax cut bill Tuesday.
Huntsman had worked closely with legislative leaders in coming up with the package with its tax cuts to take effect Jan. 1, 2008 so it was no surprise that the governor would sign SB223.
Still, it was a moment to reflect on one of the most memorable pieces of work of the 2007 Legislature, which adjourned Feb. 28.
"This is nothing short of historic," said Huntsman. "We combined the largest tax cut in our history as a state with the most significant tax reform."
Huntsman said most other states have taken a decade to work through true tax reform, and Utah did it in about three years ending off with a comprehensive bill that unanimously passed both houses.
Utah's economy, business climate and education opportunities were already dynamic, he said.
Now with the tax package "we are hyper-dynamic and the political results are remarkable."
Basically, the state personal income tax is cut by $110 million, the general sales tax trimmed by $40 million, the sales tax on food cut by another $40 million as well as $30 million reductions in half a dozen other specific taxes.
Overall, the bill signed Tuesday will become the largest tax cut in the state's history.
In the 2007 tax year, Utahns can pick between a dual personal income tax system. They can stay in the old, multi-bracket, multi-deduction/exemption system, or they can jump to a new 5.35 percent flat-rate tax system.
But under SB223, come 2008 Utahns will have only one personal income tax system, a 5 percent single-rate plan that uses tax credits instead of deductions or exemptions. It's a rate that makes Utah competitive with surrounding Western states, Huntsman said.
Almost all Utahns will see an income tax cut next year. However, several thousand taxpayers who make more than $250,000 and have large mortgage interest and large charitable payments can actually see a tax hike, maybe between $200 and $3,000.
Still, state economists say, those same taxpayers will see an overall reduction in their state taxes paid because they, like all Utahns, will see a reduction in the overall sales tax rate and a reduction in the sales tax on unprepared food.
Come the first of next year, Utahns will pay a statewide uniform sales tax rate of 3 percent on unprepared food with Huntsman promising that he will work to remove even that 3 percent over the next several years.
That and other future tax cuts will depend on how robust Utah's growing economy is.
Across the nation, various economic sectors are slowing down. While the housing market still remains strong in Utah, there are a record number of mortgage foreclosures as housing markets slow down.
This year, Utah legislators came into the session with $1.6 billion a record in one time tax revenue surpluses and tax growth over the new 2007-08 fiscal year, which starts July 1.
Legislators and Huntsman increased public education funding by a record $440 million, as well as guaranteeing teachers a $2,500 pay raise next school year with an additional one-time bonus of $1,000.
Fiscal conservatives in the House and Senate stewed as both Republicans and Democrats pushed for more and more spending. Over the current year and next year, state funds fueled by state tax revenues will grow by around 35 percent, also record spending over two years.