If all retired workers were granted the same tax benefits as state retirees, Utah would become a prosperous mecca for wealthy senior citizens, according to a state labor leader and a taxpayer watchdog group.
Utah lawmakers are agonizing over a recent U.S. Supreme Court decision striking down an agreement in Michigan that exempted state retirees from taxes. Utah reached a similar agreement with state retirees in recent years, offering exemption from income taxes instead of a pay raise.The Supreme Court said such agreements have to be extended to federal retirees as well.
Until now, most state officials have pointed to two options - either begin taxing state retirees, resulting in up to $4 million extra in state coffers, or exempt federal retirees, costing the state up to $18 million.
But state AFL-CIO leader Ed Mayne and Utah Taxpayers Association Director Jack Olson say the best solution is for the state not to tax any retired workers.
"For the state to give exemptions to all retirees would be a very fair thing and a very popular thing," Mayne said in an interview Friday. "I could see retired people coming into the state from all over, buying small houses and condominiums."
Mayne estimates the state would lose about $30 million if it stopped taxing retired people. He believes the Utah economy is doing well enough that lawmakers could find the money in state surpluses.
Mayne said the AFL-CIO's executive board is expected to take a stand on the issue during its meeting next week.
Olson said lawmakers would be acting unfairly if they granted exemptions only to state and federal retirees.
"They'll see us in court," he said. "I feel strongly about this."
State officials believe the state's best option is to begin taxing state employees and to grant them up to $4 million in other benefits to compensate for the loss.
But officials of the Utah Public Employees Association have said they will go to court to protect their exemptions. They believe the agreement they reached years ago with legislative leaders is valid.
Legislative leaders, however, note that one session of lawmakers does not have the power to bind the actions of future sessions. They believe they can break the agreement if they wish.
Meanwhile, officials in Gov. Norm Bangerter's office say they have no plans to call a special legislative session to deal with the issue. Lawmakers have already started studying their options during interim committee meetings.
"If we do call a special session for some other reason, there's no need not to deal with this," said Bud Scruggs, Bangerter's chief of staff. "The likelihood of getting through a summer without a special session is pretty slim."