Utah state government will have $35 million less to spend next year and $65 million less the year after, thanks to the "economic stimulus package" of President Bush, legislators were told Tuesday.

Both House Majority Leader Dave Clark, R-Santa Clara, and budget chairman Rep. Ron Bigelow, R-West Valley, said that the stimulus package is bad news for groups and agencies seeking money this year.

Why?

Increasing the depreciation rate that businesses can take on their research and development expenses will mean a $65 million reduction in Utah corporate income taxes over each of the next two years, experts said.

Many Utahns will also be getting the $600-per-person federal income tax rebate this year, and experts predict that 95 percent of residents will spend that money. And since Utah places its sales tax on almost everything except services, the state will take in an extra $30 million in sales tax as those rebate checks are spent.

Subtract the added sales tax revenue from the lost business income tax take, and you get a $35 million reduction in overall state tax revenues next year, experts said.

Unfortunately, since all of those $600 rebate checks will be spent this year, the state loses out on all of the $65 million in lower R&D taxes the year after.

Sen. Lyle Hillyard, R-Logan, said the state can count on making up the money lost in corporate income taxes — over time. That's because companies will use the tax break to reinvest in people, equipment and other needs that will generate new revenues for the state, he said.

The trouble is, the state has less money to spend in the meantime.

The corporate income tax breaks are ongoing, while the $30 million expected as a result of the individual income tax rebates is one-time money. Ongoing revenues and losses are built into the budget, but one-time revenues and losses are not.

"I'm trying to dispel all of the anticipation," said Hillyard, Senate budget committee co-chairman. He said lawmakers have received more than $115 million in requests for one-time expenditures — much more than usual.

Updated tax revenue estimates for next fiscal year are expected to be made on Monday. A few GOP legislative leaders worry the estimates will be lower than anticipated, meaning less money to push into budgets now being finalized by lawmakers, including proposed tax cuts.

House Republicans have already called for $100 million in tax cuts from the 2008 Legislature, which adjourns March 5. They want most of those in property tax cuts, and GOP senators are also saying they want some kind of property tax cut.


Contributing: Nicole Warburton

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