Carbon County residents may shoulder lighter financial burdens and experience tax cuts next year as Utah government revenues continue to grow significantly.
The governor and numerous legislators concur that the cuts are in order, but disagree on the magnitude of the decreases, pointed out the latest report released by the Utah Taxpayers Association.
Gov. Jon Huntsman proposes a $60 million tax cut, while Republicans in the Utah House of Representatives favor a $230 million decrease, indicated the the independent public policy organization economic analysts.
Republicans and Democrats in the Utah House and Senate have apparently decided to wait before committing to cutting taxes.
The economic recovery presents state government an opportunity to offset recent tax increases as well as relieve some of the tax burden in a state whose state/local tax and fee burden as a percent of personal income is third highest in the nation.
State revenues grew significantly during the 1990s but then leveled off and actually declined slightly from 2001 to 2003, noted the taxpayers association.
Annualized state revenue growth from 1995 to 2005 was 5.5 percent, which exceeded combined population growth and inflation of 4.9 percent.
On a positive note, revenues as a percent of personal income decreased during the time period from 7.5 percent to 6.9 percent.
The state now has two rainy day funds, one for the uniform school fund and one for the general fund.
The balance of the combined rainy day funds is now at an all-time high.
Prior to the recent recession, the rainy day fund balance reached $120.3 million in 2001, but declined to $19.5 million by 2002, explained the public policy watchdog group.
At the end of 2005, the combined balance had reached $146.2 million and the 2006 budget contains an appropriation for an additional $24 million.
In recent decades, Utah has reduced and raised taxes depending on the state of the economy.
In the 1980s as the state suffered through a flood and a recession, Utah increased nearly all major taxes that would be the equivalent in the present economy of more than $500 million annually.
The tax hikes included:
Increasing city sales tax rate from 0.75 percent to 1 percent.
Increasing state sales tax rate from 4 percent to 5 percent.
Increasing corporate income tax rate from 4 percent to 5 percent.
Increasing the gas tax from 11 cents to 19 cents per gallon.
During the 1980s, top marginal individual income tax rates were reduced from 7.75 percent to 7.2 percent.
In the 1990s, Utah reduced taxes as the state's economy expanded.
The tax cuts included:
Reducing the top marginal individual income tax rate from 7.2 percentto 7 percent.
Rducing the statewide basic levy twice.
Reducing sales taxes by allowing manufacturers sales tax exemption.
However, the tax cuts were partially offset by the state's refusal to index tax brackets for inflation.
In 2001, the state increased tax brackets by 15 percent, which offset a small portion of the bracket creep that had occurred since the early 1970s.
In addition, the state increased gas taxes from 19 cents o 24.5 cents per gallon.
During the recent recession, Utah increased taxes, although on a aignificantly smaller scale than in the 1980s.The recent tax hikes included:
No indexing of brackets since 2002, registering at about $12 million annually.
Cable and satellite TV excise tax, aabout $22 million annually.
Property tax for K-3 reading program (about $12 million annually)
Numerous fee increases
Last year, the legislature reduced corporate income taxes by $7 million by enacting double-weighted sales factor for apportionment. Due to the growing economy, taxes can be reduced while increasing education and transportation spending. Adequately funding critical needs is contingent upon a growing economy which generates additional tax revenue, and high tax burdens reduce long term economic growth.