Will Two Utah Income Taxes Be Twice as Good as One?

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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.

Want to know more? Two ;columnists offer good retrospectives on this year's tax deform effort. For more details on Utah's income tax changes, check out the Talking Taxes weblog here.

Thank you for visiting Tax Justice Blog. CTJ and ITEP staff will soon retire this domain. But ITEP staff are still blogging! You can find the same level of insight and analysis and select Tax Justice Blog archives at our new blog, http://www.justtaxesblog.org/

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