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Saturday, September 02, 2006

Chronology of Tax Reform (and a few observations)

By Curt Bramble
Senate Vice Chair of Executive Appropriations, and Chair of the Revenue and Taxation Committee

Utah’s tax system is difficult to change.

The proposal legislators will consider on Tuesday doesn’t take reform as far as many of us would like, but injecting a flat tax computation into the system is a very significant step in the right direction.

Here’s a brief history of the events that have brought us to where we are now.
2001: After years of discussion in the 1990s, the first tax reform movement in recent history was current Senate President John Valentine’s bill to spread the brackets. For the next two years we discussed indexing those brackets for inflation but were unable to gain the necessary consensus.

2003: An interim committee’s look at tax reform resulted in a 2004 task force chaired by Rep. Harper and Senator Hillyard. This new task force began to scrutinize Utah’s individual and corporate income tax system.

2004: Governor Olene Walker produced a detailed tax report and reform recommendation. We anticipated it in August 2004, but received it in November.

2005: Due, in large part, to Governor Walkers report, we authorized the Tax Reform Task Force, and spent hundreds of hours on the project. We kept a very aggressive schedule and held public meetings throughout the state. Governor Huntsman’s staff and 'brain trust' were integral to the discussions.

2006: Tax reform was a dominate topic of senate discussion during the legislative session and in the months since we adjourned.
We’re currently in our sixth year of discussion and study.

I believe it’s time to take action.

Governor Walker wanted to rely too heavily on property tax, impose sales tax on all services and do away with charitable & property tax deductions. We rejected that. Under Governor Huntsman's leadership, the proposal evolved into H3 – the flatter, fairer tax, that I consider true tax reform. After it failed in the House, we explored the double tax system – filing two different tax returns. We rejected that, too. That concept then morphed into abandonment of H3 and injecting a flat tax computation into the current system - the proposal we are now considering.

Our thesis is that broadening the tax base reduces volatility, provides more stability. A flat tax of 5.3 percent is an attractive component of that thesis that we’ve been moving toward for several years.

Some may say that the current proposal is not “tax reform.” True, it is not a major overhaul of our system. But introducing a flat tax computation is a major step. Of course, we’ll continue our discussion about a flatter tax, with a more stable, less volatile base.

I believe the current proposal is a better tax system than what we currently have. It’s better for individual taxpayers and for our state as a whole.

The Rev & Tax Committee meeting starts at 8:00 a.m. and is open to the public, as is the Special Meeting of the Senate. Those not able to attend may listen live on-line.

I’m looking forward to some great discussions on Tuesday.


Anonymous Anonymous said...

I did not remember how long this has been discussed. Thank you for the history. Let's hope that you do the right thing and keep this going.

9/03/2006 8:50 AM  
Anonymous Anonymous said...

If Utah's income tax is earmarked for education, both public and higher, and $70 million of that same income tax was earmarked for tax reform, how can the same money be earmarked for two different destinations within the same year? Wouldn't that $70 million need to be returned to public and higher education for this year and not kept in limbo (hopefully interest earning limbo) and any future cuts, ahem, reform, be from next year's income tax revenue? If you would explain how this is done, I would be grateful. Thank you.

9/03/2006 9:24 AM  
Anonymous Curt Bramble said...

Good question. The legislature has the constitutional mandate of establishing tax policy and appropriating funds. After tax policy is set, then, and only then, is the resulting revenue from income taxes required to be appropriated for education. There is no conflict with setting aside future revenues to allow the legislature to pursue tax reforms, tax cuts, or a combination of both.

The legislature established our current tax system in the 1970's. As changes become necessary, the legislature can and should modify tax policy to reduce volatility, broaden the base, enhance economic development, establish tax equity and fairness, etc.

The proposal now before us is intended to move towards
* a more stable base,
* better tax equity, and will be
* a tool for economic development by enhancing Utah's competitiveness.

It will not hurt any taxpayer and will still leave money on the table for funding increases in education, transportation, and other critical programs.

Thanks for being interested and paying attention.

9/04/2006 2:56 PM  

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