Flat tax passed, but not all approve
Utahns will now be able to pick their poison as they pay income taxes under changes to the current system that were approved by the legislature in a one-day special session on Tuesday. The change will amount to a $78 million tax cut for individuals.
Taxpayers can stay under the current bracketed structure with a top rate of slightly less than 7 percent or they can opt for a flat rate system just under 5.4 percent, with no deductions or credits.
"It means that Utahns will be able to choose which of two state income tax systems they want to follow and that will save them more money," said Mike Mower, spokesman for Gov. Jon Huntsman Jr. "They can either stay with the current system with exceptions and deductions or go with a flat rate of 5.35 percent, whichever is better for them."
Huntsman, who devised the dual-track system, said the cut is vital to Utah’s growth because it will help to bring in more businesses who will, in turn, drive more money into the state’s economy.
"One of the real challenges we have is that right now we have one of the highest income tax percentages in the nation, so it’s hard to get new businesses to come into Utah because we’re not competitive in tax rates," Mower said. "We don’t want to be known as a high tax rate state. It’s like a store keeper lowering prices to keep up with competition."
Two nearby states Nevada and Wyoming do not impose an income tax at all. Not everyone is convinced, however, that the cut is the best use for the surplus of funds left undistributed by the legislature during their last full session.. Critics of the plan say it shortchanges education and transportation needs that will continue to go unmet, unless there is a change in outlook by local policy makers. Despite the criticism, Huntsman continues to say education will not be effected in the short-term and will gain in the long-term.
"The state provided record amounts of funding for education last year and are likely to do that again this year," Mower said. "But we wanted to help the education program long-term by bringing in more businesses. The best analogy would be priming the pump."
"The Governor has a track record of highly supporting education, and has stated that it’s a high priority and he pushed funding for education last year and the legislature approved it," he said. "He has made the same commitments this year and will follow through on that."
Park City School District Board Member Vern Christensen is hopeful that Huntsman will keep the promises he made to educators around the state, but still has questions left unanswered.
"When we met with the governor he told us it wouldn’t impact education, but the question I have is that if the state is bringing in less money from taxes, who’s going to get cut education, transportation or some other public service?" he said. "The premise behind the tax cut is to drive in more business to Utah so the state will bring in more taxes from businesses, and there is some sound theory behind that, but if the legislature is willing to leave us at 51st in educational funding in the country then it doesn’t matter what the size of the surplus is. Someone is going to get the short end."
Christensen said the challenge will be, if more businesses do come to Utah, to get the legislature to use the extra money for education as promised. Saying they’ll do that now, he said, could be different from how it turns out in the end.
"We’ve got a big stumbling block with our legislature being willing to appropriate it toward education," he said. "They have to believe that if they spend money in education that it will be spent wisely and help to improve education for children."
Rep. David Ure (R-Kamas) is more of a skeptic.
Ure said that with the unemployment rate at virtually nothing throughout the state, and with the Uintah Basin needing 23 percent more workers than it currently has, even if new businesses moved to Utah, there would be no one to staff them.
"Our economy is growing so fast right now, under the present system, that I have a hard time believing the further growth is going to take place," he said. "I hope is does. I hope I’m wrong. I hope the Governor is right."
Ure tried to pass an amendment to the tax-plan that pushed the change back a year, leaving the more than $70 million surplus to go to education with the tax cut being funding the following year.
Critics of the ‘plan for education’ say that one-time money, such as the surplus in question, can’t be used for anything more than improving buildings. They say one-time money can’t go toward new teachers or reducing class sizes because the following year the money for the new teachers’ salaries is gone.
Yet, during the session Ure made an impassioned speech for the money to be used for what he believed his constituents want.
"Excuse me if one of your constituents wants his $45 back," he said before the governing body. "Sorry to offend him. I can’t say I’ve had one telephone call from a taxpayer saying, ‘I want my $45 to take my wife out to dinner tonight.’"
He continued by asking the legislature to keep the "bloody money and put it into education."
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