Facebook Twitter



Despite recent good news about state budget surpluses and pending tax cuts, some indicators show the state's economy may not be surging as quickly as believed.

And some lawmakers are calling for restraint when it comes to offering taxpayers a break during a special legislative tax-cutting session scheduled for September.The Consumer Sentiment Index, a quarterly random survey wherein 400 Utah adults are asked how they feel about the economy, shows the state's economy may have peaked at the beginning of 1989. A similar nationwide survey - used by the Commerce Department as a leading economic indicator - showed the same trend.

More importantly, state and federal officials are not quite certain how to explain recent surges in income tax collections. In Utah, the Tax Commission now estimates it will collect $40 million to $60 million more than expected in income tax.

Federal income tax collections are expected to be $18 billion more than projected. All but a few Northeastern states are facing similar surpluses.

State lawmakers, fresh from a battle with angry tax protesters who placed three initiatives on the ballot last year, believe they will cut taxes in September. But they admit they are not sure how far to go and are afraid whatever is responsible for the sudden increase in money will disappear.

"Any time you raise taxes, you risk overestimating, and any time you lower taxes, you risk underestimating," said House Speaker Nolan Karras, R-Roy. "But the overriding concern is we've had a very difficult debate during the last little while, and there are a large number of people dissatisfied with taxes. My suspicion is we will lower them some."

State officials point to a growing economy and changes in tax laws to explain part of the difference. Tax Commission spokesman Lee Shaw said Utahns received an average pay raise of 7 percent last year. A larger-than-expected growth in sales tax receipts also indicates the economy is rebounding.

But officials admit they really don't know why all the extra money is coming in. And if tax reform is causing people to sell assets that no longer are deductible - thereby raising their income - the rise in taxes paid could be only temporary.

Utah's Democrats are urging the most restraint when it comes to tax cuts.

"I am not convinced our economy is in a rebound," said House Minority Whip Frank Pignanelli, D-Salt Lake. "The governor is a political animal. He's got several years left in his term. I don't understand why he's taking chances if this is just one-time money."

Gov. Norm Bangerter has proposed taking all retirees off the income tax rolls, at a cost of about $30 million, and lowering taxes by about $20 million for everyone else. Bud Scruggs, Bangerter's chief of staff, said the proposal leaves plenty of room to absorb future shocks in the economy, considering the size of the current surplus - estimated to be $138 million in the current fiscal year and $86 million next year.

The governor wants to put $48 million into the state's "rainy day fund" for emergencies, leaving a $90 million surplus this fiscal year.

"Given what we know today, it would not be responsible to cut $89 million in taxes," Scruggs said. "That's why the governor feels a substantial amount should be stashed away."