Thanks to Tyler Farrer reminding me of the Utah State Taxpayers Association Blog, The folks over at the UTA have provided a comprehensive outline of the new tax system. Here is the outline they provided:
"1. Utah’s previous top marginal rate of 7% (reduced to 6.98% for one year) will be replaced by a single rate of 5%. This will be the first time in recent memory, if ever, that Utah's individual income tax rate has been lower than the national average (currently 5.3%, non-weighted). However, a broader tax base will ensure that Utah's individual income tax burden as a percent of personal income will remain above the national average.
2. The new system will not have tax brackets.
3. Moderate progressivity will be maintained by offering non-refundable credits that are phased out as income increases.
4. Credits are phased out at a rate of 1.3 cents per dollar of adjusted gross income in excess of $24,000 for married households and $12,000 for singles. Since the credits are completely phased out at high income levels, Utah’s new system will be a 5% flat tax for high income households.
5. Taxpayers will be able to choose a non-refundable credit based on either 6% of the federal standard deduction (approximately $10,900 in TY2008) or 6% of federal itemized deductions (excluding Utah income taxes paid).
6. Taxpayers will be able to claim non-refundable credits for each household member equal to 4.5% of the federal personal exemption (or 6% of 75% of the federal personal exemption). The federal personal exemption will be about $3,500 in TY2008.
7. Existing credits such as historic preservation, renewable energy, and several others that appear on the TC-40S form and are reported on lines 20 and 30 of the TC-40 will not be impacted by these changes."
I am pretty pleased with the new tax structure. The legislature has provided a solid tax cut using a flat tax structure. I'm pretty confident that a large majority will benefit from the proposed legislation. I spent time to make a comparative spreadsheet on Google Documents -- Give it a try at Flat Tax Vs. Regular Tax.