Whisper the word "taxes" on Capitol Hill and most lawmakers scatter like pheasants on opening day.

"I think most up here recognize there is unfairness in our taxing policy, but most don't want to deal with it," observed one House Republican.But behind the scenes, a handful of lawmakers are playing with what many say is political fire: They are talking tax increases.

At the forefront are two income-tax reform packages, one a Democratic package that broadens income-tax rates and increases taxes on higher-income families, and the other a flat-tax proposal that eliminates traditional tax deductions and would have all taxpayers paying the same rate regardless of income or family size. It also would target upper-income earners more than the current system.

Utahns want the system changed but are split on how to do it. According to a Deseret News/KSL-TV poll conducted by Dan Jones and Associates, 38 percent of those polled support the Democratic plan, while 36 percent like the flat-tax proposal. Eight percent didn't know and 17 percent said leave it the way it is.

"With the system we have now, we have the worst possible scenario," explained Rep. John Valentine, R-Orem, a tax attorney pushing the flat-rate income-tax proposal.

"We've got a complex system no one understands, and we have inflation pushing everyone into the highest brackets. I make my living off the complexities of the system, but it's not a fair system."

Valentine says the flat tax is simple for everyone to understand: You take your adjusted gross income and everyone pays a flat percentage, probably about 4 percent. The simpler the tax, the fewer tax loopholes, which are traditionally exploited by those with higher incomes.

The problem with the flat tax is not fairness, but politics. Utahns with large families would not be able to claim exemptions for dependents, nor would deductions be allowed. Those two issues combined to kill a similar flat-tax proposal in 1987.

Valentine is considering allowing taxpayers to claim "a couple" of exemptions and maintaining the deductions for charitable contributions. "But that pushes the rate to over 5 percent, and that's not much better than what we have now."

The Democratic proposals, being sponsored by House Assistant Minority Whip Grant Protzman, D-North Ogden, calls for the elimination of the deductibility of federal taxes paid, doubles the income-tax brackets and indexes those brackets for inflation.

For example, those now in the highest income-tax bracket begin paying 7.2 percent after the first $7,500. Under the Democratic bill, they would begin paying after the first $15,000.

Revenue lost through expanding the brackets would be made up by eliminating the deductibility of federal income taxes - a deduction that traditionally benefits upper income levels.

"Property tax and sales tax are inherently regressive, hurting the poor far more than anyone else," Protzman said. "The way to put some progressivity back into the system is to do it through income taxes. The folks in the upper income brackets can afford to give more."

Both Valentine and Protzman say they are giving more than just lip service to the two proposals. But Republican leaders in both the House and Senate say income-tax reform is not likely in 1991.

"Quite frankly, I don't think there will be time to address something as complex as tax reform this year," said House Majority Leader Rob Bishop, R-Brigham City.

But lawmakers will be forced to address other complicated tax issues that could result in political fallout:

- A Utah Supreme Court decision on how Utah taxes business property that straddles county lines could mean property tax increases for homeowners. The so-called AMAX issue is among the most controversial and complicated of the session.

- And smokers may not be pleased with lawmakers by the end of the session. The House Republican Caucus voted unanimously to pursue legislation that could increase the cigarette tax by 8-to-16 cents a pack to help fund substance abuse treatment programs.

- Another proposal to impose a 2-cent tax on video rentals to support arts education in public schools has already been defeated by a House committee. A Deseret News/KSL poll showed 72 percent of those polled favored such a tax, while 25 percent opposed the tax.

- Lawmakers have toyed with the idea of a 5-cent per bottle deposit on soft drinks, which is refundable at a recycling center. Of those polled, 88 percent favored the idea, while 10 percent were opposed.

- Utahns were opposed to the idea of a $5 increase in drivers license fees to build satellite offices, but lawmakers continue to push the bill, though it has been softened to a $2 increase. Of those polled by the Deseret News, 27 percent favored the increase, while 70 percent opposed it.

Other proposals before the Legislature include adjustments to the severance tax, limiting sales tax exemptions, expanding sales tax exemptions and providing income-tax exemptions for military personnel serving in the Middle East crisis.



Democrats want the state income tax changed to place a greater burden on wealthy Utahns while giving low-and middle-income Utahns a tax break. Meanwhile, Republicans are hinting they may push for a true flat-rate state income tax, as was discussed several years ago.

Which of the following plans do you favor:

A. Don't change the state income tax at all. 17%

B. Elimanate the current 50 percent deduction on state returns for federal income taxes paid and broaden the income tax brackets (the Democratic plan), increasing taxes on those who make $65,000 and more, cutting taxes for the rest of Utahns. 38%

C. Go to a true flat-rate tax, with no deductions allowed for home mortagage interest, or charitable contribution, which lowers taxes for many Utahns. 36%

D. Don't know (vol). 8%