This past week I attended a seminar on tax changes -- gearing up for the 2008 tax season. During the seminar, a representative from the Utah State Tax Commission presented tax changes for 2007 and 2008. For 2007 the tax changes aren't all that significant, if your rich ($150k+ incomes) you may very likely enjoy the benefits of the flat tax and if you are an average Joe you will pretty much have the exact same state income tax situation you had in 2006.
However, starting in 2008 things will change. We will all start using a modified flat tax system. Instead of explaining the specifics of the modified flat tax I'll refer you to a previous post in this blog.
There is at least one item that becomes noticeably absent in 2008. For years the state of Utah has given families with disabled dependants an extra exemption. In 2008 you will no longer be given a deduction for dependants, instead (if you are below certain income thresholds) you will be given a tax credit based on the number of dependants on your return. Inexplicably, the state disabled dependency exemption is not included in the dependency tax credit.
What was the justification of removing what was one of the few family friendly tax provisions in the Utah state tax code? It would be reprehensible if the exemption was removed merely as some revenue neutral provision of last years tax cut. Way to take away tax benefits from often financially burdened families in the name of a tax cut that, although with deduction and exemption based credits is beneficial to most Utah taxpayers, was clearly a tax cut for the rich.
I wonder if local disabled advocacy groups were, or are aware that the dependency exemption was a victim of the 2008 tax cut.
In the interest of full disclosure I am biased in this issue. My son has an (as of yet) undiagnosed neurological disorder. I would not like anyone to think that I view my son as a burden or a trial, but since we have started seeking diagnosis, therapies, and treatment I have become quite aware of the effort, financial cost, and time involved in caring for disabled individuals. Removing a tax break for such families was a heavy-handed move, and one I hope will be remedied.