5% single-rate tax likely
Instead, Gov. Jon Huntsman Jr. and GOP legislative leaders said Thursday that Utah should move to a single-rate personal income tax system of 5 percent that is "credit-based, not deduction-based."
The new plan floated by Huntsman seems on its way to adoption, although House Republicans wanted to take at least one more day to mull it over. Across the whole state, the plan means a $97 per taxpayer income tax reduction on income earned in 2008.
Senate Republicans, who have long backed the governor's efforts at tax reform, are ready to approve it, Senate President John Valentine, R-Orem, said after the Senate majority's closed caucus Thursday.
"This proposal will pass the Senate," Valentine said. "Our caucus really likes the proposal. It seems to meet all of the qualities we've been looking for — a 5 percent rate, a much simpler system."
Huntsman, too, was enthusiastic. "We're encouraged by our initial feedback," the governor said, promising "endless patience" as lawmakers deliberate the proposal that he said would be the final step in tax reform.
"This, if it is manifest in its current form, very much represents to me our endpoint in tax reform," the governor said. "It will make our state a whole lot more competitive and conducive to growth and the attraction of capital than we've ever been in our history."
"This is the end," said House Speaker Greg Curtis, R-Sandy.
There would be only one income tax system when taxpayers prepare their tax returns on income earned in 2007.
Under the new proposal, Utahns would get a $110 million income tax cut, enough money — along with the lower 5 percent rate — for all taxpayers to see a reduction in their income taxes.
But, admitted Curtis, there would be winners and bigger winners, depending on all kinds of factors: Amount of income, whether you take the standard deduction on your federal return or itemize, the size of your family, the amount of your mortgage interest payments or charitable giving.
But even tax experts, like Rep. Wayne Harper, R-West Jordan, were unclear what the new income tax compromise means.
"It is not a flat tax, that's for sure," said Harper, co-chairman of a former task force that studied tax reform for months a year ago.
"This is the governor's No. 1 item to get passed this session, and it's hard to deal with changing that, other than just say no," said Harper after Curtis and other House GOP leaders briefed the 50-member caucus Thursday.
House Minority Leader Ralph Becker, D-Salt Lake, said Democrats had not been briefed on Huntsman's new ideas and so couldn't make a reasoned comment. Senate Democrats, too, learned of the proposal only after it was debated by the Senate GOP caucus.
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