Thanks to a special one-day legislative session earlier this week, Utah has two income taxes. Starting next year, wealthier Utahns will be able to choose between the current graduated-rate tax system (with a top rate of 6.98 percent) ;and a new broader-based tax levied at a lower flat rate of 5.35 percent. ITEP estimates that only 3 percent of the wealthiest Utahns will benefit from the flat-tax alternative, and that the wealthiest 1 percent of Utahns will see more than 75% of the benefit from the flat tax.
Taken on its own, the flat-tax alternative has its good points: it has virtually no exemptions, deductions or credits, which makes it a lot easier to calculate than the current tax. But the high rate on the flat tax ;makes it a losing proposition for virtually all low- and middle-income Utahns, which is why the legislation allows Utah families to choose which tax system they'd like to use. The legislative leadership's ;goal of enacting tax reform with ;"no losers" made the pick-your-own system the logical choice from a political perspective. The result? 97% of Utahns will pay taxes under the same old complicated income tax rules they've always had - and many of them will probably end up calculating their taxes under both systems to see if they'd benefit from the flat tax. Call it a tax cut - but don't call it tax reform.