SALT LAKE CITY (September 1, 2006) Utah business leaders today announce their support for Gov. Huntsman’s proposal to reform Utah’s individual income tax by offering a dual tax system. The proposed system provides immediate tax relief and introduces an optional flat tax system in 2007. Business leaders call upon the governor to convene a special session this month to reduce taxes and reform Utah’s antiquated individual income tax system.

“The body of evidence is clear that lower marginal tax rates spur economic growth,” said Keith Rattie, CEO and President of Questar Corporation and Chair of the Salt Lake Chamber Board of Governors. "Fundamentally, this is about our state's ability to compete for businesses and brainpower -- the twin engines of economic growth. Growth enables our state to fund other pressing needs, including transportation and education."

The Chamber is not alone in supporting a special legislative session for tax reform. The Utah Technology Council, which represents 3,700 information technology and life science companies, and the Economic Development Corporation of Utah, which includes more than 200 public and private partners focused on growing the Utah economy, have also expressed their support for Gov. Huntsman’s tax reform proposal. Taken together, there is growing unified business support to enact tax reform now.

The urgency for a special session occurs because $70 million was set aside for tax reform during the 2006 General Legislative Session. By acting now, taxpayers will receive tax relief when they file their taxes next year. Now is also the last opportunity for tax forms and tax software to be prepared in time for the preparation and filing of taxes for 2006. 

The Chamber Board of Governors has kept a close watch during the past two years as state policy makers have discussed ways to improve Utah’s tax system. From a business standpoint, the current proposal offers several attractive features:

• Lower marginal rates – The flat tax system lowers the top marginal rate from 7 percent to about 5.3 percent, a nearly 25 percent reduction.

• Improves economic competitiveness – The flat tax system makes Utah’s individual income tax rate dramatically more competitive among states. For example, the proposal will move Utah from the 13th highest income tax rate in the country to the 11th lowest – a significant advantage in a attracting new companies and talented workers to Utah. 

• Everyone benefits – Every taxpayer will receive tax relief in 2007 under the Governor’s proposal. For example, all low and middle income taxpayers will realize tax relief due to an expansion of the brackets. Analysts estimate that 25 percent of the tax cut will go to those who pay 20 percent of the current tax. This means that low and middle income earners’ share of the overall tax burden will decrease.

• Choice and simplicity – Utah taxpayers will have the option of calculating income taxes based on the current system of deductions with expanded tax brackets, or calculating their tax liability based a new, simple flat-rate plan. The only addition to the TC-40 tax form is one line that asks the preparer to multiply the adjusted gross income by the new flat rate of 5.3 percent.

“The Governor’s proposal provides meaningful tax reform, in a simple way, that will keep our economy strong,” said Lane Beattie, President and CEO of the Chamber. “After several years of study, it is time to take action.”

The Chamber Board of Governors reviewed the dual tax proposal to make certain it would not adversely affect Utah’s education system – another key ingredient to Utah’s long term prosperity. A review of the evidence shows that lower tax rates catalyze economic growth, build a stronger economy and generate more government revenues than would otherwise be the case. The Board of Governors believes that the dynamic effects of lower marginal tax rates will strengthen funding for education over the long term.

The proposed dual system allows taxpayers to calculate their income tax using two systems: the existing system with all of the same deductions and credits and an expanded bracket (top bracket increases from $8,600 to $11,000), and a new flat-rate system where 5.3 percent is applied to federal adjusted gross income.

The Salt Lake Chamber is Utah’s largest and longest-serving business association. Our members comprise one in every three jobs in Utah. We stand as the voice of business, support our members’ success and champion community prosperity.

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