Income tax hike bill fails; more study planned for proposed severance tax increase

Published: Monday, March 4 2013 7:30 p.m. MST

SALT LAKE CITY — A bill that would have raised state income taxes on the wealthy to provide more money for schools failed Monday to pass the House Revenue and Taxation Committee, but separate legislation boosting severance taxes was sent to interim for further study.

Rep. Brian King, D-Salt Lake City, the sponsor of both HB225, which would have increased the marginal income tax rate from 5 percent to as much as 7 percent; and HB98, which would have raised the severance tax on oil and gas from 3 percent, expressed frustration.

"Cowardly. Cowardly is what I think we are as legislators at times," King said, because they "pander to the belief that our constituents are going to punish us if we vote for any tax increase. … We have no backbone on this issue."

But opponents of the bill, estimated to eventually raise about $113 million annually for schools, said the state's "flatter" 5 percent income tax rate has helped attract and retain businesses since it was adopted several years ago.

"That is a significant selling point across the nation," Rep. Jim Nielson, R-Bountiful, said. 

Rep. Gage Froerer, R-Huntsville, questioned whether the extra money would have enough of an impact on student performance to be "worth the pain" to those taxpayers hit with the increase. 

King said the hike was targeted at taxpayers "in the best position to pay," those earning more than $250,000, and only Utahns making more than $1 million would pay the top rate on their earnings above that amount.

He said the business community has pushed for a better-educated workforce to aide in economic development, and the state's dead-last ranking nationally in school spending is not helping. 

"Do we really believe we can get something for nothing?" King asked. 

He had more luck with the severance tax bill, though it was opposed by a number of industry representatives and also failed to win committee approval. Rep. Eric Hutchings, R-Kearns, was able to get enough support to send the bill to interim.

Hutchings said he wanted to find out if the state was leaving a "significant benefit" on the table by not raising the taxes on oil, gas and mineral extractions. 

E-mail: lisa@desnews.com

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