While Democrats may hope for one, and a few GOP legislators even want one, Gov. Mike Leavitt and Republican legislators are setting the verbal groundwork for no general tax cut in 1999.
That's a blow to advocates of at least a small income tax cut to offset some of the sales tax paid on food. Some who want the sales tax off food believed this was the year something could have been done about the hated tax."I can only speak for myself, not for the House Republican caucus, but I see 1999 as the first year in 10 years that we won't have much growth in revenues," says House Speaker-elect Marty Stephens, R-Farr West.
For the past four years, Stephens has been House budget chairman and helped put together the state's $3 billion highway reconstruction program and the $6 billion yearly state budget.
Stephens guesses that Leavitt and legislators will restore to 100 percent the sales-tax exemption on manufacturers' equipment and continue a sales-tax exemption on pollution-control equipment.
For entities using those breaks, it will be a tax cut -- or at least continuation of a tax cut.
But for most Utahns -- who aren't buying manufacturing or pollution-control equipment -- there's little money left over for tax reductions.
"I think you will see a (general) tax reduction in 2000. But not in 1999," says Stephens, who officially becomes speaker next month.
Earlier this year, Leavitt said maybe something could finally be done to at least lessen the pain of the state's sales tax on food. Utah is one of only a handful of states that place a sales tax on unprepared food items. In Salt Lake County, the combined state and local sales tax rates equal 6.35 percent.
Rep. Ray Short, R-Holladay, co-chairman of the Legislature's interim Revenue and Taxation Committee, has already prepared a bill that would give every Utahn a $20 tax credit in 1999 as a partial offset to food sales tax paid.
Short admits it's a small step. He says the average single adult pays around $145 a year in food tax and would get a $20 credit under his plan. A family of four spends $377 a year on food tax and would get an $80 credit ($20 for each person).
Utahns have gotten used to state tax cuts in the 1990s. Since Leavitt came to office in 1993, he and lawmakers have given about $250 million in tax relief, all while state government has grown considerably. The state's budget has doubled in a decade.
But Leavitt recently said that a greater financial effort must be made in state corrections -- where prison guards are quiting to take higher-paying jobs in county jails and law enforcement -- and in certain education programs.
And slower-than-normal revenue growth for fiscal 1999-2000 may make it difficult to give a tax cut this coming year, says Leavitt.
The governor says if lawmakers want to give an income tax credit for food tax paid, they will have to come up with the money somewhere other than revenue growth. Leavitt said he will be allocating most of that for expenditures, not general tax cuts, in his recommended budget.
Last Friday, Leavitt said he supports $28 million being spent on "job incentives" next year -- which includes $5.6 million to fully restore the manufacturers' equipment break and $6 million for pollution-control equipment sales.
Stephens says the state has to bond for $100 million next year to complete a borrowing program for the $3 billion Centennial Highway program.
"So we have to ask, does it makes sense to borrow more money (for roads in 1999) so we can afford a tax cut? Personally, I don't think so," says Stephens.
In 2000, the transportation borrowing will be finished, and monies can more freely flow to tax cuts, he notes.
2000 is also an election year for Leavitt (should he run for a third term), for all 75 House members and for half of the 29-member Senate.
"It is an election year. But what really matters (in formulating a tax cut) is that we're past the transportation borrowing" in 2000, said the speaker-elect.
Legislators didn't give a tax cut in 1998. In fact, because of federal income tax changes, Utahns will pay about $8 million more this year in state income taxes.
A new vehicle fee system takes effect Jan. 1. The current fair-market-value vehicle property tax system is being scraped in favor of fees based on the age of the car or truck. And since fees are not tax deductible -- like property taxes -- Utahns who own cars also will be paying about $3.3 million more in state income tax in 1999 because of that change, legislators were recently told by state Tax Commission officials.
In light of those relatively small state income tax increases, an income tax credit would be nice.
But, says Stephens, 1999 may not be the year for it.
The minority Democrats, meanwhile, want to close various sales-tax loopholes -- including the newly given manufacturers' equipment sales-tax exemption -- and use those savings to pay for tax cuts.
Senate Minority Leader Scott Howell, D-Granite, for the second session in a row will introduce in 1999 a bill that would cut income taxes by $75 million next year, cut another $75 million in 2000 and come 2001 remove the sales tax from food all together. Howell is co-sponsoring his bill with Sen. Mike Waddoups, R-Taylorsville, who maintains that with revenue growth in Utah, the state can make those cuts that in turn will help curtail growth in state government.