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Might lawmakers ax property tax?

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Could the Utah Legislature, with residents voting to agree, drastically reduce or actually eliminate property taxes on homes?

It may seem like a radical idea, but Sen. Robert Montgomery says it's possible.And the best part of his plan, he says, is to have voters approve the move twice - once in November 1998 when they'd be asked to remove all references to property taxes from the Utah Constitution and again in 1999 in a special referendum approving the new kind of taxes imposed to make up to schools, counties and cities their lost property-tax revenues.

"We can do this. No government or school would be harmed. And we're getting growing support," Montgomery, R-North Ogden, said Tuesday.

One group that certainly won't support his effort is Sen. Howard Stephenson and his Utah Taxpayers Association. Stephenson, R-Draper, is president of the association, a wide-ranging group that is basically funded by businesses.

In his January association newsletter, Stephenson calls for businesses to rally to defeat Montgomery's effort to remove all references about property taxes from the constitution. Stephenson predicts a massive shift in taxation to businesses if Montgomery isn't stopped.

Montgomery, a retired surgeon, says he now has the support of several leading tax-fighting Republicans. "House Speaker Mel Brown and Senate (GOP) leadership are willing to go forward and explore this," said Montgomery, who added he's met quietly with influential legislative leaders about his plan for weeks.

Simply put, Montgomery proposes this:

- In the 1998 Legislature, lawmakers would repeal all references to property taxes in the constitution. That action, in which Gov. Mike Leavitt has no direct say, would go before voters in November 1998.

- Without the constitutional requirement that all property in the state be taxed equally, legislators, by law, could then tax different kinds of property differently. That opens the way for business property taxes to remain where they are today - "We won't raise business property taxes," Montgomery said - and for the taxes on homes to be greatly reduced or actually eliminated.

- During 1998, the citizen/legis- lative Tax Review Commission would study how best to make up revenues lost to school districts, counties and cities in any property-tax reduction on homes.

- In the 1999 Legislature, the Tax Review Commission's recommendations would be considered and a plan formulated for reducing homeowner taxes and raising other taxes in an offset. The Legislature would vote to put that alternative on the November 1999 bal-lot as an official voter referendum.

- In November 1999 citizens would vote on the plan.

- If the plan is approved, Utah, on Jan. 1, 2000, would have a new taxing system - one that could eliminate the property taxes on primary residences.

Admittedly, eliminating property taxes on homes would take a huge financial bite.

Montgomery says that property taxes bring in about $1 billion a year - about half from businesses and half from homes. Eliminating the home tax "means about $500 million would have to be found elsewhere," he said.

But where?

"Now, we're looking at the corporate income tax and the sales tax." A new gross receipts tax on businesses could also be considered, he says.

And that's why the Taxpayers Association is up in arms.

"You have to understand that while the association purports to oppose any taxes, when push comes to shove it sides with businesses against citizens because businesses pay its dues," Montgomery said.

"At 5 percent we have one of the lowest corporate income tax rates in the nation, certainly ours is lower than surrounding Western states that have income taxes," Montogmery said.

On Jan. 1 of this year, 24 of Utah's 29 counties opted for a new tax shift of their own, imposing a new quarter-cent, countywide sales tax and lowering all property taxes accordingly. In many of the counties, the result is significant reductions in the counties' dependency on the property tax. Cities also have a sales tax, a utility franchise tax and other more minor sources of revenue.

But schools districts get most of their funds from the property tax. The state's Uniform School Fund - which is spread out to public and higher education - gets much of its money from the state's income tax.

Stephenson says Utah's traditional three-legged tax stool - income, property and sales tax - is an effective and balanced system and that removing the property tax from the constitution and lower or reduce property taxes on homes upsets that stable stool and could lead to government and school funding chaos down the road.