Dueling tax-reform proposals led to an exchange of sharp words Thursday among lawmakers.
On one side, critics of a 4 percent flat-rate tax proposal say it will punish the poor and enrich the wealthy.
On the other, opponents of the so-called "Jones-Mascaro" plan which among other things would limit the number of exemptions for dependent children say the proposal is fundamentally flawed.
Reps. Pat Jones, R-Cottonwood Heights, and Steve Mascaro, R-West Jordan, are displeased that the Tax Reform Task Force won't give their state income tax revision plan "a full hearing."
But Thursday, a task force subcommittee did listen to the pair for about 20 minutes, with a few sharp words exchanged both during the public meeting and afterward.
"Our bill would pass if all legislators, and especially the citizens of this state, could see how our plan stacks up against a flat-rate tax," Mascaro said.
Sen. Curt Bramble, R-Provo, said after the meeting that as co-chairman of the task force, he's
willing to present the impacts of their bill HB197 in the 2005 Legislature to colleagues. But Bramble makes no promises as to whether the Jones/Mascaro bill, which in different versions has failed in the House twice before, will get serious consideration as the huge tax reform effort moves forward this summer.
"If we don't" get a full hearing, an upset Mascaro said after Thursday's meeting, "it will be strictly against what the House Revenue and Taxation Standing Committee instructed" at the end of the 2005 Legislature, when the committee specifically referred HB197 to the task force.
Jones said 87 percent of Utah families would pay a bigger tax under the flat-rate proposal.
But Bramble said a preliminary subcommittee recommendation endorsing a 4 percent flat-rate income tax is just that preliminary.
All kinds of changes could be made before the task force makes final recommendations in the fall and the Legislature and Gov. Jon Huntsman Jr. take up the issues before the 2006 general session in January.
"We're still several steps away from turning anything into law," Rep. Steve Urquhart, R-St. George, reminded committee members and the public.
But Mascaro, Jones and supporters of their bill worry that GOP legislative leaders are moving down a track of a flat-rate income tax, refusing to seriously consider alternatives.
Many GOP lawmakers have turned their backs on the Jones/Mascaro bill. And Thursday, Bramble, a certified public accountant, said the bill "is wealth redistribution," something he personally opposes.
HB197 is complicated. Among other things, it would increase the current income tax brackets, the highest bracket going from $8,626 in income to $25,000. It would take away the deductions for federal taxes paid. And it would allow only three exemptions for dependent children for a married couple (you would get five total exemptions). A couple wouldn't get the exemption for a fourth, fifth or any more children.
"Wealth redistribution?" asked Mascaro. No more so than a 4 percent flat-rate income tax that would raise the taxes of lower-income Utahns and give more wealthy citizens big tax breaks, he said.
For example, Mascaro said after the meeting that his bill would increase taxes on a family of four making $500,000 a year by $3,460, but the 4 percent flat-rate tax recommended by Republicans on the income tax subcommittee would cut that same family's state taxes by $5,209 a year.
A family of four making $35,000 a year would see its state income taxes go up by $606 a year under the 4 percent flat-rate plan, but under Jones/Mascaro, taxes would decrease by $185, Mascaro said.
But Bramble and other task force members said no one is going to increase taxes on the poorest of Utahns.
There are a variety of ways to deal with the problem, perhaps the easiest being to just exempt from state income taxes income earned up to $20,000 or even more.
Credits could even be given for sales taxes paid on food and clothing for lower income people, Bramble suggested.
"This (income tax) is one small piece of the whole (tax reform) package," said Neil Ashdown, Huntsman's deputy chief of staff, who sits on the task force.
A simpler, more effective system would allow tax rates to be lowered. And lower sales tax rates would mean less taxes paid by lower-income people, who usually spend nearly all their income buying necessities.
In addition, if the sales tax is extended to personal services like lawn care, haircuts and so on wealthier people spend more of their income on those kinds of things and so would be paying more taxes overall, he said.
"Overall, it all averages out," Ashdown said.
But in tax reform debates, it always seems some groups get as many breaks as others get tax hikes.
The committee also heard Thursday about how a gross receipts tax placed on Utah Power and the Intermountain Power Agency the final night of the 1995 Legislature is unfair, likely unconstitutional and should be repealed.
Sen. Howard Stephenson, R-Draper, asked that a bill be prepared to repeal the tax, which last year brought in $13 million to the state. Comparing the way the tax was passed to Hitler's Nazi Germany, Stephenson said, "Never in my 13 years in the Legislature have I seen a more unfair tax imposed."
Finally, it appears that Huntsman's idea of phasing out the current 5 percent corporate income tax seems to have bogged down.
Several GOP legislators said Thursday that perhaps a better way to stimulate Utah's economy would be to make several other changes to the current corporate income tax, including exempting the first $500,000 that a firm makes and/or giving firms a more appealing way to figure their taxes.
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