Utah CPAs Oppose Dual Track Income Tax Plan
The Utah Association of Certified Public Accountants last week sent a letter to Governor Jon Huntsman, Jr. criticizing the governor’s proposed two-option income tax plan scheduled for a vote in a special session of the state legislature later this month. “There is no question that true tax reform is needed in the state of Utah", the letter said, according to the Salt Lake Tribune. “We are concerned that the current proposals don’t meet enough of those goals to be effective tax reform.”
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Bryan Bolander, president of the Utah Association of CPAs, personally delivered the Association’s letter to the state Tax Review Commission, an independent panel that advises the governor and Legislature. The panel had asked for the letter, the Tribune reports.
Under the governor’s proposed plan, Utah taxpayers could chose to file under the existing plan, with deductions and expanded tax brackets or, beginning in 2007, at a flat rate of 5.3 percent with no deductions or credits.
“Preliminary calculations and analysis show only high income individuals who do not itemize or have mortgages and charitable contributions will elect under the new system to use the new tax rate,” the CPA Association’s letter says, adding, “The proposal may actually create significant headaches for the State of Utah and taxpayers.”
Becky Shreyer, chair of the Utah Association of CPAs’ practice advisory council told KCPW News in an interview that she had no issue with giving a tax cut to the rich because they do pay a lot of taxes, but added, “I do think however, that it needs to trickle down at least a little bit to the middle class, the retired, other income ranges that would actually feel the tax cut a lot more than some of our wealthiest taxpayers.”
Shreyer suggested raising the exemption rates, which are currently between $26,000 and $35,000 for single taxpayers. Exemptions for retired persons could be raised too, she said.
Huntsman says that he wants lower rates to make the state competitive. “I’ve always argued that a flatter tax, in the 5 percent range, would be a good place to take tax reform. It would make us truly competitive. We’re taking an initial step. We’ll see how the economy performs in subsequent years and see if we can afford to do more," he told the Deseret News.
While the governor said he expects only 5 to 10 percent of taxpayers to elect the flat rate initially, he said that additional tax cuts may bring the number to 30 to 40 percent in coming years, according to The Deseret News. The governor would not say when additional changes would be made.
Utah expects to take in a record $351 million in surplus taxes at the end of the fiscal year, June 30th. The legislature voted to give $160 million in tax cuts in their last session, including a $70 million income tax cut, a $70 million cut in the tax on food and a $20 million business tax cut. The food tax cut and the business tax cut were approved, but on the last night of the session the legislature did not approve the $70 million income tax cut because it was tied to the flat tax, the Deseret News says, in a separate report.
Last year the Church of Jesus Christ of Latter-day Saints told legislators that charitable deductions should remain part of the Utah tax rate. When asked by the Deseret News if church leaders had expressed opposition to his current flat-rate tax plan, Governor Huntsman said, “No, none.”
All income tax revenues go to the public schools in Utah, the Salt Lake Tribune reports and educators worry that large tax cuts will undermine education in the state. The Salt Lake City Chamber of Commerce supports the governor’s plan.