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Will Utah tax cut climb to 120 million?

Advocates of education, others express concerns

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Deseret Morning News graphic

The 2006 Legislature is steadily moving toward giving Utahns their largest state tax cut ever.

As higher education, public education and human service advocates worry about how their programs could be financially affected, conservatives in the House and Senate are talking about giving even bigger tax cuts than originally planned.

Legislators have already agreed to trim $70 million from the state sales tax on unprepared food. That 2 percentage point reduction takes effect Jan. 1. Another $20 million is going toward targeted business tax cuts.

But while lawmakers in the 2006 general session put aside another $70 million for personal income-tax cuts, lawmakers couldn't agree on how those cuts should be given.

Now Gov. Jon Huntsman Jr. and GOP legislative leaders have agreed to try to give those personal income-tax cuts through a "dual tax system."

While bills are being drafted for a possible mid-September special session that would allocate $70 million in personal income-tax relief, conservative legislators are promising to push for even a larger tax cut — as high as $120 million in the income tax.

"You bet there will be efforts to increase that tax cut," Rep. Greg Hughes, R-Draper, said Wednesday.

In June, the Utah Tax Commission said the state ended the last fiscal year with a $351 million tax surplus in the state's two main funds — the largest tax surplus in Utah's history. And conservatives are saying it should now be matched with the largest tax cut in Utah's history.

"Whether in the special session in September or in the 2007 Legislature, there will be efforts to lower that (income) tax rate. The $70 million is the lowest hurdle — it should be higher. The lower the rate, the more competitive Utah can be in economic development. And that is what we're looking to do," said Hughes, who chairs the informal Conservative Caucus, which numbers around 30 members of the 56 Republicans in the Utah House.

Standing against the rush to give even larger tax cuts are Democrats, a few moderate Republicans and special-interest groups that don't want to see too much money coming out of revenues that otherwise would go to public and higher education and Human Services.

And if majority Republicans are forcing tax-cut votes just weeks before November's legislative elections, "it is a wrong-headed concept," said House Minority Leader Ralph Becker, D-Salt Lake. "We are dealing with long-range tax policy. We should deal with it on its merits, not right in the middle of a campaign year."

"We don't support any tax cut in a special session," said Susan Kuziak, executive director of the Utah Education Association, the main public-education teachers union. By law, all personal and corporate income taxes go for public and higher education.

Both Kuziak and Becker said it is unwise to trim taxes in a special session, where overall state needs won't be considered. It is much better to decide tax cuts in the context of the overall $9-billion-plus state budget, they said, which is set during the annual 45-day general session in January and February.

"The Democratic caucus still has a lot of questions (but) few answers," Becker said. "We are now finding out what the majority party is planning by reading it in the newspaper."

Republican leaders are planning a daylong caucus the first week in September. That morning, the Revenue and Taxation Interim Committee could hold a public hearing on the current tax proposals — thus meeting the requirement of public input before a legislative vote. If there are then enough votes in GOP caucuses for the plans, Huntsman would call a special session several weeks later.

Becker worries things are moving so fast that his questions may not be answered before tax-cutting votes are taken next month.

"Does the tax reform simplify our tax system? Apparently not. Is it fair? How much will it cost, not just next year but down the road? Does it benefit mainly the wealthy, as it appears to do?" Becker said.

"With the growth coming in higher and public education, wouldn't it be better to invest in class-size reduction, getting and keeping good teachers?" he asked.

Kuziak said some legislators seem to be rushing to decisions without knowing the consequences.

No matter how much money the state is taking in, any surplus should not be an excuse "not to make real investments in public education," she said. "The levels of tax cuts they are talking about" — from $70 million to $120 million in income tax cuts — "is way too high."

Commissioner of Higher Education Richard Kendell said: "We hope they look at the long-term implications" of large tax cuts now.

Kendell said the Board of Regents is establishing both a five-year and a 10-year plan to respond to the state's higher-education needs, including work-force demands and shortages in teachers, engineers and nurses. How will taking $70 million or $100 million out of education funding affect those goals?

Despite those concerns, said Rep. John Dougall, R-Highland, who has pushed income-tax cuts and reform for months, "we've already taken $70 million out of the budget" for income-tax reform.

"We can give that (much) and not have to reopen the budget. But we did have huge surpluses" in June, said Dougall. And the Senate and House GOP caucuses will ultimately decide, along with Huntsman, how much of a tax cut to give, he said.

E-mail: bbjr@desnews.com