State Sen. Greg Bell, R-Fruit Heights, presented a plan to make the state income tax more progressive at a Hinckley Institute of Politics forum on Wednesday, Oct. 5.
A study commissioned in 2004 showed that the existing tax system will not adequately meet future needs of the state, said Jeff Hatch, spokesperson for the Financial Planning Association of Utah.
Policy makers agree that change is necessary but disagree on which changes the state tax code needs. A legislative tax force has deliberated on the issue all year, Hatch said.
Bell’s presentation to the tax force was upstaged later that day by Gov. Jon Huntsman’s presentation of his own tax reform plan.
Bell said his plan would enact a progressive tax code, in which people at different economic levels would pay different percentages of income tax.
His proposal involves four tax brackets, ranging from 3 to 7 percent of federal taxable income.
It would lower taxes slightly for lower-income people and raise taxes slightly for wealthy individuals.
“I think there is some morality about a tax system,” Bell said. “I believe that taxing persons at the same rate who have widely different incomes doesn’t have the same moral basis, the same moral defensibility as a progressive income tax.”
Huntsman’s plan is a “flatter” tax that is 5 percent for all Utahns but includes credits and exemptions to help lower-income citizens.
Supporters of the Huntsman plan argue that a lower top tax rate will draw more businesses and wealthy individuals to Utah, Bell said.
The senator admitted that his plan was not well received when he presented it to his colleagues in the Legislature.
“Particularly the Republican members responded frigidly and seemed to be much more interested in a flatter tax,” he said. “(They) seemed to have a pretty favorable response to the governor’s program.”
One of the panelists, Rep. Roz McGee, D-Salt Lake City, said she preferred Bell’s plan.
“I think (his approach) is more progressive,” she said. “There is a lot of general appeal to the notion of a flat tax. When people get down to the particulars of it, they find it (isn’t) as good as they thought.”
The third member of the panel, independent financial planner Chuck Newton, rejected both the Huntsman and Bell plans.
Newton, the government affairs director for the Financial Planning Association of Utah, proposed keeping the current 7 percent top rate but eliminating the state income tax entirely for many lower-income citizens.
“The federal poverty level for one person is $9,500,” he said. “Why are we taxing people at the poverty level on income tax? We shouldn’t be.”
Students attending the presentation were impressed by the panelists’ ability to make dry subject matter come to life.
“I thought the conversation was pretty lively,” said senior political science major Remington Johnson. “I mean, it’s a little hard to take in, ’cause it’s taxes, but it was well addressed by all of the speakers.”