As you file your federal and state income taxes, you might remember this: Utah government collects an extra $3.9 million for 1999 because the state income tax brackets haven't been indexed for inflation since the early 1970s.
Federal and state income tax returns are due by midnight Monday.
The Utah Taxpayers Association held a press conference Monday morning in front of the Utah State Tax Commission building in Salt Lake City to protest the "automatic tax increase."
For the past several years, lawmakers have considered one or more bills that would index the state tax brackets. But each time the bills have failed.
Philosophically, most lawmakers and the governor probably agree that the state income tax should be indexed to inflation, said Taxpayer Association Vice President Greg Fredde. "The challenge is finding the revenue" to pay for it.
In the 2000 Legislature, both Sen. Howard Nielson and Rep. Carl Saunders had bills that would have indexed the tax brackets. And both lawmakers postponed the first indexing until after fiscal 2001 so it wouldn't have taken any money away from the budget lawmakers were struggling to balance. But both bills failed.
"I think the education community feared that the demands upon it were too great to lose any revenue," Fredde said. By law, all income tax revenues go to public and higher education. And so teachers lobbied against the bills, Fredde said.
Fredde said his association (made up mostly of local businesses) would lobby Gov. Mike Leavitt to "take off the table $3.5 million" in his recommended 2001-2002 budget which he will submit to legislators in December.
"Putting the money aside first is the only way we can build up enough reserves to allow" the state tax brackets to be adjusted for inflation yearly, Fredde said.
"Last year we saw $105 million in growth in the state income tax revenue — precedented growth. Now in these good times is the time to do this," he added.
Because the income tax brackets have not been adjusted since 1972, 70 percent of all Utah taxpayers fall into the highest tax bracket — 7 percent starting at $7,500.
By comparison, in the 34 states that have state income taxes, the average maximum bracket begins at just more than $47,500, Fredde said.
"Utahns already carry the 13th heaviest income tax burden in the country, in large part due to the state's failure to index the tax brackets," Fredde said. "Out of every $1,000 earned, Utahns pay $30.45 in individual income tax, 21 percent more than the 43-state average."
Utah's 7 percent top rate is not high according to other states. Rather, it's the fact that the top rate kicks in so low — at $7,500 — which causes the heavy tax burden, he explained.
You can reach Bob Bernick Jr. by e-mail at bbjr@desnews.com.