Facebook Twitter

LEAVITT FLOATING IDEA OF $30 MILLION TAX CUT

SHARE LEAVITT FLOATING IDEA OF $30 MILLION TAX CUT

Gov. Mike Leavitt wants a $30 million tax cut in 1995, Capitol sources said Monday.

The governor was set to release his 1995-96 recommended budget later Monday afternoon.The $30 million should come in some kind of income-tax relief, say sources. Leavitt has no firm proposal. "He's just throwing the $30 million on the table and legislators will take a shot at it," the source said.

However, Leavitt wants lawmakers to consider several areas. The relief could be in personal income-tax cuts - perhaps to help foster parents or those taking care of disabled dependents - an idea already put forward by Senate President Lane Beattie. Or it could come also in corporate taxes, such as extending the break given on manufacturing equipment, sources said. The later is advocated by GOP Sen. Howard Stephenson, R-Draper.

Leavitt also suggests that homeowners get some property-tax relief. He wants to give counties the option of a "shock absorber" - the idea being that local entities could defray up to 10 percent of a home's increased valuations over a five-year period, giving people caught in Utah's hot real estate market time to pay off higher taxes.

Anticipating the tax relief in Republican Leavitt's budget message Monday afternoon, Democratic lawmakers proposed huge cuts of their own Sunday.

Their plan would return at least one-third of the state's ongoing revenue surplus to taxpayers in the form of lower sales and income taxes and a curb on higher property taxes.

Though the surplus projections will remain fluid until a state budget is adopted early next year, they currently range between $150 million and $200 million. That's not counting a one-time revenue surplus of between $70 million and $100 million anticipated for the current fiscal year, which ends June 30.

It's not clear if Leavitt's "shock absorber" 10 percent help on property taxes will be enough to settle the nerves of angry homeowners.

The House GOP caucus voted unanimously last week to lower the state-mandated property tax for education and raise the constitutionally allowed homeowner property tax exemption in an effort to offset the Tax Commission's factoring order, which increases the "market value" assessments of homes by an average 20 percent across the state.

Leavitt's "shock absorber" plan wouldn't cut taxes, just put off the paying of higher taxes that come through the factoring order or reassessment by counties.

Leavitt would be standing against his own House Republican majority if he doesn't agree with actually cutting taxes.

But there's also pressure building among legislative Republicans for some kind of general tax cut. In the 1994 Legislature Leavitt was a Johnny-come-lately to tax relief, not agreeing to a paltry $24 million cut in the sales tax until after updated revenue estimates in mid-session showed another $50 million in revenue growth.

"When times are tough, citizens are asked to dig deep into their pockets and help out," said House Minority Assistant Whip Grant D. Protzman, D-North Ogden, on Sunday. "So when times are good, it's important that any relief go to the people footing the bill."

To that end, the Democratic minority in the Legislature is suggesting a 1/8-cent to 1/4-cent reduction in the sales tax, depending on whether the surplus ends up at the low or high estimate. They also propose some rebracketing or an increase in the personal exemption to slash an additional $35 million from income taxes.

House Minority Whip Kelly C. Atkinson, D-West Jordan, said many Democratic lawmakers would have liked to propose an elimination of the sales tax on food, but the price was too high: $150 million.

The more modest reduction in sales taxes along with a cut in income taxes leaves enough extra money to meet the state's critical needs, he said. At the same time, this year's one-time surplus can be dedicated to one-time expenditures, such as highway improvements, the Democrats said.

Many local leaders have called on lawmakers to raise the gasoline tax to help pay for a backlog in highway projects, but no one expects that to happen in a year of bounty.

"You didn't see us call for an increase in gas taxes," Atkinson said. "When you have these kinds of surpluses, it's not the time to raise taxes."

Rep. Judy Ann Buffmire, D-Salt Lake, said her party also will propose legislation to prevent the state and school districts from reaping a revenue windfall from the across-the-board valuation adjustments ordered by the State Tax Commission.

In announcing their proposals a day ahead of the governor, the Democrats appeared to take their cue from President Clinton, who beat the new Republican Congress to the tax-rhetoric podium last week. They made it clear that the politics of taxes will play a major role in the upcoming legislative session.

Protzman said, "The danger is that when you have such large surpluses, many special interests show up with their hands out. Returning the money to the taxpayers - that's where the battle will be fought in this next Legislature."

Predicting that some political leaders will suggest delaying a tax cut for another year, Protzman said, "Those who say wait simply want to wait for an election year." Leavitt, all of the 75-member House and half of the 29-member Senate face re-election in 1996.

Although they are not likely to be consulted by the governor or the Republican majority, the Democrats said they would be willing to talk about any sizeable tax cut.

"But we expect a Scroogian response from them," House Minority Leader Frank R. Pignanelli, D-Salt Lake, said. He challenged the governor and the Republican majority to come up with a proposal equal to the Democrats'.

He also urged lawmakers to reject the tax rebate idea, which he said would cost so much to administer that it wouldn't be worth the effort. Sales and income tax reductions would put more money back into the economy to help "keep the engine running," Pignanelli said.

Utah is headed in fiscal 1995-96 for another record spending year. Already, Leavitt has announced huge increases in transportation, education and corrections spending. Over the past two weeks, the governor has said he wants to spend an additional $81.6 million on transportation - an 18 percent increase over this year - $80 million more on public education - a 7.3 percent increase - and spend $13 million more on a juvenile crime prevention next year - a 19.4 percent increase.