Leading Utah legislators are talking about giving Delta Air Lines a multimillion-dollar income tax break in an effort to keep the airline's valuable hub at the Salt Lake City International Airport as Delta talks to other airlines about possible mergers.
Speaking Wednesday to the Deseret Morning News editorial board, Senate President John Valentine, R-Orem, said GOP senators like the idea of changing the corporate income tax to give specific breaks to the transportation industry, which would include Delta Air Lines, which has its Western hub in Utah.
Meanwhile, Gov. Jon Huntsman Jr. said he is "fully engaged" in trying to keep Delta or its corporate successor should the Atlanta-based airlines merge with another carrier here. But, the governor warned, as valuable an asset as Delta is to Utah, state officials still must be careful not to get into a tax-cutting bidding war that could ultimately harm state revenues so much that it would not be worth it.
Delta Air Line officials did not immediately return calls seeking comment.
Delta is reportedly considering merging with either Northwest Airlines or United Airlines both of which have their own hubs at airports outside of Utah. United is in Denver, while Northwest's nearest hub is in Minneapolis/St. Paul.
Valentine said that among various tax cut proposals to be considered by lawmakers when the Legislature meets in general session starting Monday, one idea liked by his GOP Senate colleagues is to give a corporate tax cut via a complicated change in how business taxes are figured.
Called the "single-weighted" tax, the proposal is to let Utah businesses figure their corporate income tax based only on the amount of sales they do in the state. Taking out of the formula both businesses' employees salaries and their capital items would encourage businesses to keep both their physical assets like airplanes and their employees in Utah and not move them to other states.
Senate Majority Leader Curt Bramble, R-Provo, said such a tax incentive which would be good for all Utah businesses, but is too costly to do across the board "does not directly address the Delta merger."
But giving the tax break to only transportation businesses could be one more argument in Utah's favor should a new, and larger, Delta have to decide whether to keep its Salt Lake hub or move those operations to a hub of its new partner.
House Republicans have already decided that they want to give a $100 million tax cut this year.
Senate Republicans are looking at giving some kind of tax relief, but Valentine said Wednesday that it would not be a large tax cut like the Legislature gave in 2007 and 2006, which totaled hundreds of millions of dollars.
Valentine said legislative budgeters are now working out the numbers on any corporate tax cut for the transportation sector. "It may be in the range of $20 million (a year) but that is right off the top of my head," Valentine said.
The problem with giving the tax cut across the board is that while there may be sound economic development reasons to allow all Utah businesses to go to the single-weighted sales tax structure for Utah's corporate income tax, that clearly can't be afforded by the state now, said Valentine.
Delta would not get all of that tax break because the trucking and railroad industries would also qualify for tax cuts under the plan, said Valentine. But certainly the tax break could mean millions of dollars to Delta, and GOP senators hope that at least in some measure that would add to Utah's case to keep the hub here.
In any case, GOP senators and representatives both favor giving some property tax reductions during the 2008 session. Reworking the corporate income tax may be favored by some GOP senators, but House Speaker Greg Curtis, R-Sandy, recently told the newspaper that House Republicans were not strong on that plan.
However, Curtis will travel to Atlanta Friday, along with Bramble and Sen. Wayne Neiderhauser, R-Sandy, a leading tax reformer, to talk to Delta officials about how the state can help Delta before and after any merger. Huntsman said his economic development bosses are also in touch with Delta, letting airlines executives know that Utah cares about its hub operation here.
Huntsman did not include any tax cuts in his recommended 2008-09 budget, released last month. And he said Wednesday he hasn't changed that stance, including any help for Delta.
Still, Huntsman on Wednesday said Delta is one of the state's most important corporate citizens, delivering not only passenger service to local residents but freight service and an overall sense of importance to the state's prestige.
"Keeping Delta is critical," said the governor. "Any change in Delta's operations here could have wide-ranging impacts" on the state.
"I support any rational and reasonable discussions" about special tax breaks, Huntsman said. He questioned, however, if the single sales tax formula was "the right answer" to keep Delta, especially without more information about the merger talks and more clarity about whether Delta, if it did merge, would consider staying in its Salt Lake hub without a tax cut.
Like Valentine, Huntsman cautioned that any tax cut proposal should also take into account that "what you give to one will be wanted by all," which may not be affordable this year."I can't say today that I favor a tax cut" for Delta, he said. "I don't know where the (merger) talks are going. And I worry about getting in a bidding war" for any single business.