ALAN CHOATE - Daily Herald | Posted: Thursday, January 19, 2006 11:00 pm
Senate Republicans endorsed a $100 million tax cut Thursday that would institute an income tax credit in lieu of removing the sales tax on food -- a position at odds with what's been proposed by other legislators and the governor's office.
Beyond the target amount and the tax credit, caucus members included few specifics. Senate President John Valentine, R-Orem, also emphasized that the proposal could change and lawmakers continue to debate the issue.
"What happens in these situations is there is a lot of negotiation between the bodies -- because it must pass both bodies," Valentine said.
House of Representatives members said it was too early to predict how the tax cut debate would go, but they reiterated their $230 million tax cut position and said anything less would be allowing state government to expand too quickly.
"I'm actually surprised that the Senate came up with a number this early, and I'm surprised that it's as high as $100 million," said state Rep. Stephen Urquhart, R-St. George, and a member of the appropriations committee. "I didn't think they wanted to cut even that much."
Current projections show the state with a $1 billion budget surplus in the coming fiscal year. Lawmakers are wrestling with how to allocate those resources to meet a long list of public needs while still reducing taxes.
In their caucus meeting Thursday, GOP senators set their sights on a $100 million tax cut target using a combination of sales and income tax reductions, although no specifics were identified.
They also expressed general support for a tax credit -- estimated at $75 to $86 per person -- to reimburse people and families for what they spend paying sales taxes on food purchases.
The caucus reached this position after looking at several scenarios in which the sales tax on food was removed and other taxes were adjusted to make up for the $167 million in lost state revenue. Utah cities have also been wary of removing the levy because they collectively would lose an estimated $61 million.
"We took an analytical approach. We said, 'Give us the facts,'" said Valentine. "We're trying to say, 'Don't rush into a decision just because it's politically expedient.'"
The House, meanwhile, has already advanced legislation to remove the sales tax from food and raise the part of the tax that's applied locally. That bill, HB 109, could cut state general fund revenues by $167 million, reduce water and transportation funding by $5.7 million and reduce local revenues by about $12.9 million.
Gov. Jon Huntsman Jr. has made removing the sales tax on food a centerpiece of his agenda this year. His proposed budget allocates only $60 million for tax cuts, but in his State of the State speech Tuesday he said the revenue loss would be made up by increasing the local tax rate, collecting more revenue now lost on online sales and using revenue from economic growth.
Valentine said the GOP senators left much of the proposal vague in order to maintain room to negotiate. He said they also could revise their stance, and their tax cut target, to align with the new revenue estimates expected in February.
House Majority Leader Jeff Alexander, R-Provo, said that it's possible to read too much into the differences between the House and Senate proposals.
"There are differences of opinion, no doubt about it," he said. "This is really the beginning of the process more than anything else.
"You may be surprised, when we get to the end, how close we may be."
This story appeared in The Daily Herald on page A1.