Tuesday, November 29, 2005

5% flat tax urged for Utah..... sort of.

The Utah Tax Reform Tax Force, although unable to solidly come up with a specific recommendation urged that the state go with a 5% flat tax along with a 50% credit for mortgage interest, and a 50% credit for charitable contributions, according to DesNews. One specific recommendation task force made was for the removal of the sales tax on food. Upsetting to some members of the task force was that they were unable to agree on one specific recommendation and passed along several options. Rep. Roz McGee, D-Salt Lake, a longtime proponent of removing the sales tax, was also disappointed the task force only passed a "concept" and did not support a specific proposal. "Voting things out as a concept is an abdication of the responsibility we had as a task force," she said. "We've worked for seven months. . . . To vote things out that are concepts is a disservice to our fellow legislators and to the public." Bramble defended the task force "the deep review of the state tax system was commendable and is already successful. " The Chair of the task force says their are many things that can be done, keeping our existing system may be best.

Here is my basic take on the flat tax:
(This isn't fully representative of the states proposal, it is a generic representation)

Average citizens -- Using current state sytem
AGI 50,000
Itemized 20,000
Exemptions (6)14,100
Taxable Income 15,900
Tax (7%) 1,113

Average citizen -- Flat Tax
AGI 50,000
Tax (5%) 2,500*
(Proposed credits not accounted for, because I don't know how they are proposed to work)

Tax increase 1,387

Rich Citizens -- Using simplified current state system
AGI 1,000,000
Itemized 70,000 (limited)
Exemptions completely phased out
Taxable Income 930,000
Tax (7%) 65,100

Rich Citzens -- Flat tax
AGI 1,000,000
Tax (5%) 50,000 *

Tax Decrease 15,100

The flat tax is the biggest joke to me because it is clearly a tax cut for the wealthy. I thouroughly believe that the task force found that there was no way to reform the tax system using the flat tax that would not negatively effect the middle class, however being in a Republican stronghold they couldn't fully dismiss it. The current system is pretty darn equitable, even though it seems to be a hassle, the average joe will pay less in taxes under the system of deductions and credits than under a flat percentage tax. I'd have to suggest the state offer a child tax credit, and I would have very few complaints about the states tax code. The state currently has very few tax credits that positively effect families, which seems pretty schizoid in a majorly religious conservative stronghold.

I'm very happy that they made the recommendation that the sales tax on food be eliminated. Steve U posts that the cities are going to fight removing the sales tax on food tooth and nail. Steve wrote,"This seems a bit strident, especially since the cities will receive significant inflationary and expansionary increases in their revenues this year, not to mention significant increases from franchise fees they place on top of escalating energy costs." If there was ever a tax that hurt the poor it is this one, good job Task Force. I hope the legislature follows through with this suggestion.

No comments: