Tax relief coming in 2008

The average Utah family of four will see a tax reduction ranging from $125 to $2,000 annually because of tax reform and tax cut legislation passed over the past two years, a study shows.

The Utah Taxpayers Association — an advocacy group backed by local businesses — has released an analysis of how individual Utah families will be affected by tax cuts given by the 2006 and 2007 Legislatures.

UTA Vice President Mike Jerman says that to the best of his knowledge, no other entity has put together the last two years of tax cuts to see how Utahns fare under the approximately $300 million that will go to individuals — not businesses — once all the cuts kick in Jan. 1, 2008.

"Low-income families see the largest percent in tax cuts compared to their income, while wealthy families see the largest tax cuts in overall dollars," said Jerman.

But that is to be expected, because the wealthier the family, the more overall tax they paid before the tax cuts were given, he noted.

Low-income families get most of their tax relief in sales-tax cuts, especially reductions in the food sales tax, while higher-income families get most of their tax relief from the lower state personal income tax.

Jerman's economic models look at a family of four — dad, mom and two kids — in annual income ranges from $20,000 to $500,000.

But Jerman also looks at how several sales-tax reductions over those two years (and two sales-tax hikes) affects taxpayers, as well.

Jerman's study makes several broad-ranging assumptions. And his findings for wealthy families — $200,000 a year to half a million dollars a year income — excludes the several thousand families who will actually see tax hikes because of the new 5 percent single-rate income tax that takes effect in 2008.

Sales-tax rates will be jumping up and down over the next two years. Some tax is being removed from unprepared food, and the state overall rate will drop. But then special-transit sales taxes are going up, in part to keep transit districts whole while food taxes drop, and in part because local residents last November voted themselves a 0.25-cent sales-tax hike to pay for commuter and light-rail expansion.

In Salt Lake County, where 40 percent of the state's population lives, sales taxes overall will go from 6.6 percent in 2006 to 6.9 percent in 2008, noted Jerman. But significant income-tax cuts offset that rate hike.

And nearly all Utahns still will be paying less tax when local and state taxes are examined, Jerman added.