House Republicans on Tuesday started discussing which tax they favor cutting.
The Republicans are looking at three alternatives. Democrats want to cut the sales tax from food, but that doesn't have a lot of Republican support.Republican alternatives include:
- Property tax - Last year legislators cut $90 million in property taxes. If they remove another third from the tax this year and another third next year, then the state would no longer mandate a mill levy for public education support.
"This would get the state out of the property-tax business," said Rep. Bill Hickman, R-St. George. He believes this has strong support among House Republicans.
- Income tax - Sen. Lyle Hillyard, R-Logan, says last year's $90 million property-tax cut was, in part, eaten up by local cities, counties and school districts that, either through reappraisal or raising tax rates, took some of that cut.
"I'm a convert. Last year I wanted the property-tax cut - all of (the state-mandated) tax removed." If legislators remove the rest of the state-mandated tax, "within five years the property tax will be right back up where it is" today because local property taxing entities will raise their taxes, he says.
But, Hillyard adds, an income tax won't go back up and all of the tax cut will go to Utahns. "Half of the business property tax" is paid by firms owned out of state. Some residential property is also owned by out-of-state residents. Why give them tax cuts? Hillyard asks.
Hillyard wants to cut the top income tax rate from 7.2 percent to 7 percent. Most Utahns pay the top rate. Now that top rate kicks in at $7,500. He'd raise that bracket to $10,000, giving low-income Utahns a greater tax break proportionally. If more tax-cut money is available, maybe the 50 percent deduction of federal income taxes now allowed on state returns can be raised to 60 percent or 70 percent, he said.
- Tax credit for food - Reps. John Valentine, R-Orem, and Evan Olsen, R-Young Ward, have a plan to give an income-tax credit for food sales tax paid. If an $85-per-person credit were given, limited to a $260 credit per household, then Utahns would get the whole tax cut, and the sales tax paid on food - a very hated tax among Utahns - could be reduced as well.
The average Utah family consists of four people and makes $28,000 a year, says Valentine. About $4,300 is spent by that family on food items, which equates to about $260 paid in food sales tax, Valentine says. "That is why we cap the income tax credit at $260 - the fair amount paid by the average Utah family, average income," said Valentine.
"This is a clean tax cut, taken immediately by people by changing their withholding, and only helps Utahns. Cut the sales tax from food and you loose (tax income from) tourists who buy food in the state. In my city of Orem, losing that portion of the tourist-paid tax would mean a 30 percent increase in property taxes. We certainly don't want that," said Valentine.