Legislative Democrats, out to prove they're the friend of Utah's overtaxed middle class, say Gov. Mike Leavitt's "sorry" tax cut of $30 million isn't enough. Lawmakers should give at least a $64 million tax cut next month, Democrats say.
Leavitt suggested the $30 million tax cut as part of his 1995-96 budget recommendation. He suggests spending $4.9 billion next year, up from $4.6 billion this year."We have at least $90 million in surplus sitting in accounts to use in case of an emergency. We have $196 million in new growth (in revenue). We should have at least a one-third (of new revenues) tax cut, and it should go to the middle class," House Minority Whip Kelly Atkinson, D-West Jordan, said after hearing Leavitt's budget presentation Monday afternoon.
It also appears that Leavitt's recommended budget pushes surplus monies from one fiscal year to another in an effort to sidestep the state's revenue limitation law.
Leavitt specifically denied that is the case. But his own budget document shows that after supplemental spending is added to this year's fiscal budget, the amended 1995 spending plan falls just $1 million short of the spending cap. Yet Leavitt puts millions of dollars into a special transportation fund for use in future years. (See accompanying story).
"I fully support the spending cap," said Leavitt in a budget press briefing. The spending-cap law will die in June unless lawmakers re-authorize it during the January-February general session. "And I support continuing" the law, he added.
The late Gov. Scott M. Matheson, sometimes with a slight smile, used to tweak legislators' noses when he pushed onetime surpluses into ongoing programs, saying "state monies are fungible - and you can look that word up in the dictionary." Fungible means interchangable, especially when referring to financial matters. Leavitt may be taking a page from Matheson's book.
Sen. Howard Stephenson, R-Draper, who as president of the Utah Taxpayers Association has watched state budgets for years, said Leavitt's budget also contains a hidden property tax hike.
The Legislature each year orders local school districts to levy a property tax, which is collected in the Uniform School Fund and then returned to districts based on student population. While counties, cities and other property taxing entities have to go through Truth In Taxation on all property reappraisals, the Uniform School Fund's tax doesn't. Thus, when property is reappraised at a higher level, the fund's taxing rate doesn't fall to compensate for that - as do taxing rates for other governments. This "hidden windfall" has gone on for years. Leavitt's budget has "about $7 million to $8 million in windfall built in," says Stephenson.
It's likely lawmakers, reacting to building anger by homeowners over rising property taxes, will place the Uniform School Fund under Truth in Taxation - and the $8 million must be cut or made up somewhere else, said Stephenson.
Leavitt's budget is generous, dumping more money into education, transportation and juvenile crime-fighting. He continues popular programs like Centennial Schools and getting more computers into classrooms, while reducing class size in high-impact school districts.
He proposes giving state workers 4 percent "compensation increases" - although just how much each worker would get depends in part on productivity and manager assessment.
Even with record surpluses and spending, Leavitt proposes an $89 million bonding package. However, most of the money is for transportation needs. Only a handful of new buildings would be built, with Leavitt saying new ways must be found to teach college students without huge new building pro-grams.
But the $30 million tax-cut plan will likely draw the most attention when lawmakers convene Jan. 16 for their 45-day session.
Leavitt proposes five areas of possible tax cuts, most in the income tax arena. But while he's for giving counties the option of delaying large increases in property-tax hikes that result in inequitable assessments, he proposes no property-tax cuts.
That flies in the face of what the House Republican caucus has already voted on - tax-rate reductions in the state-mandated public school property tax levy and increasing the constitutionally allowed homeowner exemption. That is property-tax reduction, while Leavitt's plan would just extend property-tax hikes into a five-year payoff schedule to make the bitter pill go down easier.
"I think the Legislature is more inclined to look at more broad-based relief" in taxes, said House Speaker-elect Mel Brown, R-Midvale. Brown was careful not to directly criticize Leavitt's proposal. And Leavitt said he'd be willing to talk to legislative leaders about what kind of tax cuts would be best.
What Leavitt suggested - like giving tax credits to poor people for the sales tax they pay on food or tax credits for foster parents and those who take care of disabled dependents in their homes - sounds good, said Brown. "But they may be too specific. It doesn't look like they'd reach a lot of voters. We in the House stand for election more often than the governor and senators" and see the need more clearly to appease angry residential homeowners "who are seeing their taxes going up and up," said Brown.
Democrats, who are in the minority in the House and Senate, want bigger tax cuts and want them targeted to the middle class. "With these huge surpluses and growth in revenue, we could easily give a $64 million tax cut," said Atkinson. "If we make a significant tax cut in income taxes, we could fuel our economy and make sure the engine keeps running."
Stephenson said he personally wants to see a $60 million tax cut next year. "That will keep the governor's promise of not letting government grow faster than the people's ability to pay and will keep us under the spending cap, at least for one more year," Stephenson said. It is possible there could be an "unholy alliance" between Democrats and fiscally conservative Republicans in the 1995 session - their aim to cut taxes more than Leavitt wants.
Leavitt pointed out that he vetoed a bill in 1993 that would have raised property taxes by $45 million; agreed to a sales-tax cut of $24 million and sidestepped a $9 million property-tax hike in 1994. "Reasonable, moderate tax cuts over several years add up - I hope we can do another (tax cut) in 1996," the governor said.