HOW CAN REPUBLICAN LEADERS, IN THIS ELECTION YEAR, RETURN THE DEDUCTION OF FEDERAL TAXES ON THE STATE INCOME TAX RETURNS - WHICH HELPS THE WELL-TO-DO MORE THAN THE POOR - WITHOUT GIVING DEMOCRATS WONDERFUL CAMPAIGN AMMUNITION?

THEY'RE WORKING ON IT, FOLKS. AND, AS PREVIOUSLY REPORTED, GOV. NORM BANGERTER AND GOP LEGISLATIVE LEADERS WANT A SUMMER SPECIAL LEGISLATIVE SESSION TO GIVE THOSE TAX BREAKS BEFORE THE NOVEMBER ELECTION.THE LEGISLATURE, WITH REPUBLICANS AND DEMOCRATS AGREEING, DID AWAY WITH THE DEDUCTION OF FEDERAL INCOME TAX ON STATE RETURNS A YEAR AGO. THE TAXES FILED APRIL 15 DISALLOWED THAT DEDUCTION FOR THE FIRST TIME, MAKING MANY UTAHNS PAY MORE STATE INCOME TAX.

PEOPLE ARE NOW SCREAMING ABOUT IT, AND THEIR LEGISLATORS ARE HEARING THE SCREAMS. TRUE, MANY WHO ARE ANGRY ARE UPPER-INCOME UTAHNS. BUT THEY ARE ALSO THE PEOPLE WHO DONATE TO THE GOP CAUSE AND WHO CONTACT THEIR LEGISLATORS ABOUT THEIR CONCERNS.

BANGERTER, A REPUBLICAN, AND GOP LEGISLATORS HAVE BEEN HEARING FOR MONTHS FROM CONSTITUENTS THAT THE DEDUCTION FOR FEDERAL TAXES SHOULD BE RETURNED. BANGERTER CERTAINLY KNOWS ABOUT IT. INDUSTRIALIST JON HUNTSMAN, WHO WAS FORMING A SERIOUS REPUBLICAN CHALLENGE TO BANGERTER, MADE THE RETURN OF THE DEDUCTION ONE OF HIS FIRST CAMPAIGN ISSUES. HUNTSMAN HAS SINCE GOTTEN OUT OF THE RACE, BUT THE SUPPORT HE DREW SHOWED BANGERTER THAT THE TAX ISSUE IS FOR REAL THIS ELECTION YEAR.

OF COURSE, IF THE DEDUCTION IS RETURNED IT WILL COST THE STATE MONEY. THE STATE TAX COMMISSION SAYS THE FEDERAL TAX DEDUCTION MEANS $105 MILLION TO STATE COFFERS IN 1988. SINCE BANGERTER AND MOST LEGISLATORS DON'T WANT TO CUT STATE BUDGETS AT ALL, MUCH LESS BY $105 MILLION, MONEY FOR THE RETURN OF THE DEDUCTION MUST COME FROM SOMEWHERE. THE SOMEWHERE IS SURPLUS IN STATE REVENUE, PRIMARILY INCOME TAX SURPLUS. THE INCOME TAX SURPLUS IS NOW ESTIMATED AT $25 MILLION BUT COULD END UP AT $55 MILLION OR MORE. OTHER TAX SURPLUSES COULD ADD SEVERAL MILLION MORE TO THE SURPLUS POT.

THE POLITICAL QUESTION IS, HOW DO YOU RETURN THE SURPLUS BY RESTORING THE DEDUCTION FOR FEDERAL INCOME TAX WITHOUT HANDING DEMOCRATS THE CLASSIC CAMPAIGN HIT ON REPUBLICANS: THAT REPUBLICANS CARE ABOUT RICH PEOPLE, NOT POOR PEOPLE?

YOU DO IT, SEVERAL GOP LEADERS SAY, BY PLACING A LID ON THE AMOUNT OF FEDERAL TAX THAT IS DEDUCTIBLE ON STATE RETURNS AND YOU FLOAT THAT LID ACCORDING TO HOW MUCH SURPLUS YOU HAVE.

FOR EXAMPLE, IF THE STATE HAS $25 MILLION IN ONGOING SURPLUS, THE TAX LAW CAN BE CHANGED TO ALLOW A DEDUCTION FOR FEDERAL INCOME TAX PAID UP TO WHATEVER INCOME LEVEL EATS UP THE $25 MILLION. MAYBE IT IS AN INCOME OF $30,000 A YEAR, MAYBE $40,000 A YEAR. FOR INCOME ABOVE THAT CUTOFF LINE, THE TAXPAYER DOESN'T GET THE FEDERAL TAX DEDUCTION. IF THERE IS $55 MILLION IN SURPLUS, THE CUTOFF LINE IS RAISED TO, SAY, $60,000 OF INCOME, AND SO ON.

THROUGH THAT MANNER, REPUBLICAN LEADERS SAY, POORER UTAHNS ARE GUARANTEED BENEFITS OF RETURNING THE FEDERAL DEDUCTION. MORE WELL-TO-DO UTAHNS ALSO GET SOME BENEFIT, ALTHOUGH THEY LIKELY WON'T GET THE TOTAL DEDUCTION THEY HAD IN 1986 AND BEFORE SINCE NO ONE EXPECTS $105 MILLION IN ONGOING SURPLUS.

THUS, ALL UTAHNS GET SOME TAX BREAK IN THIS ELECTION YEAR, AND THE DEMOCRATS DON'T GET A CAMPAIGN ISSUE, THE REPUBLICANS FIGURE.