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Wednesday, February 15, 2006

Tax Cuts and Tax Reform

Yesterday, the Senate Majority Caucus voted to reserve $300 million for a combination of tax cuts, transportation funding, and water development.

The final budget will include four major elements.
1. Tax cuts
2. Infrastructure funding
3. State employee compensation
4. Committee recommendations
Yesterday’s decision allows us to move forward with numbers 3 and 4, above, while we continue to work out the exact balance between tax cuts, road funding and water development.

We also spent some quality time discussing the “metrics and mathematics of income tax reform” with the Governor, Keith Prescott, and others from the Executive Branch. From today’s Trib:
Senators made it clear they want a larger tax cut to soften the impact of the Huntsman reform on many of their constituents. Without that, Valentine, said lawmakers might consider leaving the existing structure in place, but lowering the top rate to produce a tax break.

"We asked him to come back with $60 million and $100 million [tax cuts] to give us benchmarks," Valentine said.

Huntsman agreed to rework the plan, possibly lowering the rate to 4.75 percent, which would divert about $100 million in growth from schools and back to taxpayers, said his economic adviser Keith Prescott.
The Governor and his staff were well prepared and highly informative. The reformers' message: a flatter tax system 1) Gives Utah a long-term competitive edge, and 2) Averts a distant-but-pending train wreck in education funding.

We look forward to discussing the impact of several different tax cut/tax reform scenarios in caucus tomorrow.

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