The Utah State Tax Commission economist who warned Gov. Norm Bangerter's administration that the governor's proposed ongoing tax cuts might be inaccurate has been reassigned to a new job in the commission.
Chief Economist Doug Macdonald fell out of favor with Bangerter when a memo written by his office found its way into the hands of Rep. Frank Prante, D-Logan. In arguing against Bangerter's plan - ultimately adopted by the Republican majority in the House and Senate - Prante quoted from the internal Tax Commission memo, supposedly secret, that said that ongoing income tax surpluses may only be $40 million a year.Bangerter wanted $70 million a year in ongoing income tax relief. The Tax Commission, along with the State Budget Office and the Legislature's own fiscal analyst, ultimately agreed that the $70 million figure was a good one.
Republicans gave that tax cut, along with returning $80 million in one-time tax rebates, to taxpayers in last week's special session - adopting Bangerter's plan to the letter over the strenuous objections of the Democrats. (See related story B3).
Francine Giani, Bangerter's press secretary, said the governor had nothing to do with Macdonald's reassignment. However, she added that the governor did ask tax commissioners to investigate how Prante got the memo and did say that he has little confidence in the tax commission's revenue forecasts, which Macdonald's office prepares.
"At this time, I can say that no pressure was brought to bear on the commission. This is an internal change. We don't make policy for our departments in these kinds of matters," Giani said. "This is not a political issue. But it is important that the governor have people working for him that he trusts. That's fair. If Doug had continued to make forecasts for the commission, the governor would seek outside advice."
Tuesday, Bangerter said he had lost confidence in the Tax Commission's ability to forecast revenue projections accurately. "I do not have great confidence in those who project revenue. I've been very disappointed for the last two years about their absolute inability to even come close. Still, they're the best source of information I have," he said.
The Tax Commission is specifically set up to be outside political pressure - the commissioners are appointed to six-year terms and both political parties must be represented on the commission.
But Rob Jolly, campaign manager for Ted Wilson, the Democrat challenging Bangerter, said politics was clearly evident here. "The commission should give the governor independent advice. It should be his main source of objective projections on taxes. He's taken that advice in the past. Now he doesn't like what it is, and for political reasons he ignores it. When the advice he doesn't like gets out in public, he wants to take retribution against those who gave it. That's not how you run government."
Macdonald has been praised in past years for the accuracy of the tax predictions. In 1987, however, many states guessed poorly on how federal tax changes, especially in relation to income tax on capital gains, would affect state revenues.
Utah collected about $84 million extra in income last year, and dealing with that surplus has proved a political football this election year. Raising taxes by $160 million in 1987 and then cutting them by $80 million in 1988 has proved a campaign issue that was hopped on by the Democrats. Wilson calls it "Bangerter's yo-yo economics."
Tax Commission spokesman Lee Shaw, in confirming that Macdonald had been reassigned "to special projects," said commissioners still have confidence in his projections. "This (reassignment) has to do with the special session, all that happened there, with the memo," Shaw said.
He defended Macdonald's forecasts, saying, "We have traditionally been conservative in those forecasts. We were conservative in those forecasts in 1987, and we had a surplus. California had a $1 billion shortfall. Massachusetts had a $600 million shortfall. Which is better?"
Shaw said commissioners will meet next week to discuss what will be done with Macdonald. Commissioners were out of town Wednesday. Even though Shaw spoke with Commission Chairman Hal Hansen in San Antonio, where he is attending a seminar, to find out what he should say about Macdonald, Shaw said Hansen would refuse to talk to the press about the Macdonald incident. Hansen failed to return Deseret News telephone calls. Macdonald is on vacation and couldn't be reached for comment, either.