One of the great fights in the 1989 Legislature is over who should get the most tax relief this year.
It's a battle between Democrats and Republicans, House and Senate.The decision may be made much easier early next week when new revenue estimates for 1989-90 are compiled. If enough extra money is "found" in the projections, perhaps everyone can be satisfied.
If not, and if only the $19 million tax reduction suggested by Gov. Norm Bangerter is adopted, there will definitely be a fight over the House's proposed tax cut and the Senate's recommended tax break.
Politically speaking, the Senate's tax reduction plan carries with it the greatest jeopardy for the Republican senators who back it.
Sen. K.S. Cornaby, R-Salt Lake, and other GOP senators (they've been joined so far by only one Democrat, Sen. Winn Richards, D-Ogden), favor increasing the deduction for federal income taxes paid on state returns from the current 33 percent to 50 percent.
Meanwhile, House members, both Republicans and Democrats, favor Rep. Frank Knowlton's .25 percent reduction in the sales tax. Many Democratic House members would like to see the sales tax reduced on food only. But so far the majority inclination is to reduce the sales tax across the board.
The political implications enter when you look closely at who receives the most benefit under the two plans. (See chart.)
Clearly, under Cornaby's proposal the more money one makes, the greater the percentage of tax reduction and the more money saved by the taxpayer. Under Knowlton's sales tax reduction, wealthier Utahns save more than their poorer neighbors. That makes sense since wealthier people spend more of their disposable income on consumer goods. But their percentage of savings doesn't increase as their income goes up, as is the case in Cornaby's approach.
Democrats in the Senate call Cornaby's proposal "the rich man's tax break" because the well-to-do benefit so much more than low- or middle-income taxpayers.
The attempt to restore the deduction is a perfect example of how the Republican Party takes care of its traditional base - the wealthy - charges Democratic State Party Chairman Randy Horiuchi.
Republicans, on the other hand, say those same well-to-do Utahns took the greatest tax hit two years ago when the deduction was removed altogether. In fact, several GOP senators say privately their state income taxes quadrupled when the deduction was removed.
"Restoring part of the deduction just returns the money to the very people we took it from. And that's fair," says Cornaby.
TAX REDUCTION IMPACT
Income Tax Reduction Sales Tax Reduction
Income per year Percent Dollar Percent Dollar
for family of 4 Reduction Reduction Reduction Reduction
$30,000-$35,000 2.9% $34 3.8% $50
$50,000-$75,000 3.2% $89 2.5% $59
Over $250,000 5.1% $1,055 1.4% $298