Our State has been discussing ways to modernize our antiquated tax system for several years. These discussions by tax advisors,legislators and academics have led to a number of substantive changes to the sales tax and the corporate income tax systems.
However, we have not yet passed significant individual income tax reform. Now is the time for action.
Despite agreements during the 2006 General Session to implement broad tax reform, the income tax portion, and the $70 million committed to it, remained unsettled when the session ended. We are dedicated to giving Utah taxpayers meaningful tax reform and the dual individual income tax system proposal is the culmination of this process.
Under the dual tax proposal, each taxpayer can choose to remain under the current tax system, with all the current deductions, credits, and exemptions or choose a flat tax rate of about 5.3 percent on adjusted gross income. This will provide a means for giving targeted tax relief while ensuring that no one sees tax increases.
Utah's individual income tax system is in need of reform in order for our state to remain competitive both regionally and nationally. In the last year alone, 20 states have lowered their personal income taxes for purposes of economic expansion. If we do not join those ranks, we increasingly will find ourselves at a disadvantage in the all important area of job creation.
Most critically, targeted tax reform will also enable us to stabilize education funding in our state. The dynamic effects of targeted tax changes result in stronger economic growth and more stable income tax revenues, strengthening funding for public education, our most important expenditure
We are considering a September special session to enact tax reform which will provide immediate relief in this tax year with expanded tax brackets and the introduction of a flat tax system in the next tax season. This session would also consider a .25 percent sales tax increase option for transportation projects in Salt Lake County to be placed on the November ballot, giving voters a voice on this important issue.
Without targeted tax reform we will fall behind our regional neighbors as firms decide to go to states with more favorable tax climates.The dual tax system provides a means to institute meaningful tax reform, targeted tax reductions, and across-the-board tax relief to all taxpayers in the State of Utah.
It is time for our state to prepare itself for the realities of the 21st Century.