Legislative Task Force Votes to Keep Mortgage Deduction

Legislative Task Force Votes to Keep Mortgage Deduction

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SALT LAKE CITY (AP) -- A task force of Utah legislators made tentative changes on Wednesday to Gov. Jon Huntsman's plan for overhauling income taxes.

Huntsman proposed a 5 percent tax with a limit on income exemptions for family members and only one write-off -- a partial credit for charity deductions. The task force voted to remove the cap on family exemptions and restore a deduction for home mortgage interest.

The Tax Reform Task Force made the changes to broaden discussions at public hearings to be held next week around the state. It has yet to endorse any particular tax plan, instead keeping alive four competing proposals, including Huntsman's plan and the committee's revised Huntsman plan,

A third proposal would keep the current tax system but lower the rates, which top out at 7 percent.

A fourth proposal calls for a true flat tax at 4 percent for every taxpayer.

The task force is working against a Nov. 7 deadline to make recommendations for changes in income, property and sales taxes to standing legislative committees for action in the 2006 session that opens in January.

Huntsman unveiled his proposal for a 5-percent income tax last week, saying it would make Utah more competitive with surrounding states.

Only Colorado has a lower rate at 4.63 percent, although Wyoming and Nevada have no income tax.

Huntsman's plan would reduce Utah's 7 percent rate and disallow a host of tax breaks that he said have "corrupted" the tax system, leaving households of similar income with widely disparate tax liabilities.

The 5 percent rate would start to phase in after the first $12,000 in household income -- $6,000 for unmarried people.

Every household would qualify for a $4,000 income exemption for each dependent, but the number of exemptions would be capped at five. That means two parents could take a tax break for no more than three children.

Legislative leaders say any such cap would be unpopular in a state that celebrates big families, but Huntsman advisers said the perception that Utah has a lot of big families is largely a myth.

Keith Prescott, chairman of the Utah Tax Review Commission, said 87 percent of Utah tax returns in 2003 claimed no more than four exemptions -- equal to two parents and two children. His group had rare access to Utah tax returns -- without the names -- for an analysis of the impact of Huntsman's proposal on different income groups and overall state revenue.

(Copyright 2005 by The Associated Press. All Rights Reserved.)

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