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Republican legislative leaders are leaning toward cutting property taxes next year rather than reducing the sales tax on food or increasing the deduction for federal taxes allowed on state income taxes.

Nothing has been decided yet by the majority party in the Utah House and Senate, and may not be until mid-February when lawmakers get a better idea of how much "surplus" money is available in fiscal 1989-90.But Senate GOP leaders are already looking at several ways to trim the property tax, confirmed Senate President Arnold Christensen, R-Sandy.

Gov. Norm Bangerter, also a Republican, suggested in his recommended $2.9 billion budget that $19 million go toward tax relief. He didn't suggest which tax should be cut.

Sen. K.S. Cornaby, R-Salt Lake, introduced a bill Thursday that would increase the federal deduction on state income taxes from the current one-third of federal taxes paid to two-thirds. "That would cost about $20 million, close to what the governor wants in tax relief," Cornaby said.

Several bills have been introduced reducing part or all of the sales tax on food.

"We're looking at several ways (of cutting the property tax)," said Christensen.

The overall tax rate could be reduced via the state-mandated school levy. (School funding wouldn't be harmed. More sales tax or other general revenue would be put into the Uniform School Fund to make up for the property tax cut.)

The discount given to primary residences - owner-occupied homes - could be increased, thus cutting the assessments on such homes, which translates to lower taxes.

Or some other combination could be found, Christensen said.

House Majority Leader Craig Moody, R-Sandy, said preliminary discussions among GOP leaders do lean toward the property tax cut. "I like the idea of cutting taxes on homes. Removing the sales tax on food, partly or completely, is messy," said Moody.

Store owners would have to apply one tax rate to a food item, like a loaf of bread, and a different rate to a non-food item, like a bar of soap, at the time of sale. For computerized, food chains that may not be difficult. But for mom and pop operations it could be a real headache.

There are political reasons for the Republicans favoring property tax relief. First, the property tax is the most hated of all taxes, so cutting it would find support in the populace.

Second, Democrats and the tax limitation movement leaders (with only a few Republican lawmakers in tow) want the sales tax off food. Republican leaders aren't anxious to let them set the agenda.

Finally, Cornaby's increase of the federal deduction, while helping all those who pay federal and state income taxes, gives proportionately bigger tax breaks to those who pay more federal tax. Democrats are loaded for bear if Republicans try to give the more well-to-do tax breaks.

"I don't want to see that federal deduction at all, that's No. 1 with us," said House Minority Leader Mike Dmitrich, D-Price. "Personally, I'm not opposed to a cut in property taxes. But I'd want that as a trade-off for not freezing that tax." Bangerter, besides the $19 million cut, also wants to freeze property tax rates, a campaign promise he made.