Wednesday, July 19, 2006

Tax Reform -- The Pitch

On Tuesday in the Utah GOP leaders out lined tax cut plans in the Deseret News. "There are no losers who would pay more under the new plans", said Rep. Wayne Harper, R-West Jordan, "There are only some big winners — and those are mostly low-income Utahns," The official word on the plan is that there will be a dual tax syatem, from which Utahns choose the most beneficial result. Under flat tax portion of the new tax system, Utahns would pay at a rate of 5.3% with no credit for itemized deductions -- with a twist. In order to combat the tax cut for the rich, the proposal is including exemptions up to a phase out amount. On the traditional tax side, all remains the same except the top rate will either, (a) remain the same with brackets being more spread out, or (b) be lowered from 7% to 6.9%. The Governor is intent on this being passed by the end of the year in time for the '06 tax season.

The flat tax proposal, while still not my favorite I appreciate the effort to make the flat tax (at least) appear to be a viable option for the average taxpayer by allowing exepmtions for lower and middle class taxpayers. On the traditional side, the Gov's .1% top rate drop looks sexy on the outside but I would argue it to be less advantageous than the Legislature's version. Spreading the brackets out would allow for more taxpayers to pay in lower brackets as opposed to the current brackets. Current brackets are incredibly narrow, the highest 7% bracket is reached if taxable income reaches 8700 dollars for married joint filers -- so that generally means a vast majority of taxpayers.

I must applaude the Gov. and the members of the Legislature. While I think we need to be honest with ourselves Rep. Harper -- "big winners" are still going to majorly include the wealthy. However, this proposal looks like it may do an adequate job in spreading the cut across the spectrum of Utah taxpayers. I'd like to know more of the specifics of the proposal before I would fully embrace the deal. Any tax cut is better than no tax cut, I'm excited to see this progress.

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