State Advised to Raise Taxes

State Advised to Raise Taxes

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SALT LAKE CITY (AP) -- A banker who advises the state on bond issues has suggested that taxes need to be raised -- or restored to what they were before some of the tax cuts.

Kent Michie, a Zions Bank vice president, wrote Gov. Mike Leavitt that the state's AAA bond rating could be in jeopardy because of the heavy reliance on short-term fixes to weather the current budget crisis.

The letter written Oct. 15 and made public on Tuesday recommended that "the state's basic tax rates for the sales tax, the income tax and the gasoline tax be raised or restored to appropriate levels to support a long term and realistic estimate of expenditure levels going forward."

In a June 26 letter, also released Tuesday, Michie recommended a temporary statewide property tax increase "to immediately replenish the state's Rainy Day Fund up to at least $100 million."

Leavitt and lawmakers in recent months have drawn the $120 million Rainy Day Fund down to $20 million.

The letters were released by state Treasurer Ed Alter during a Republican legislative caucus.

"I would never say there's not a possibility" of a tax increase, said House Speaker Marty Stephens, R-Farr West. "But I don't sense any broad support for a general tax increase."

Stephens said he was aware of the first letter regarding a property tax increase, but not the second on hiking all taxes.

Leavitt received both letters and took the warnings and tax-increase advice into account, spokeswoman Natalie Gochnour said, "But in the end the governor did not feel it was necessary or prudent to include it as part of his recommendations."

Alter echoed Michie's warning that the state must put its financial house in order by either cutting expenses or raising taxes, or a combination of both. He did not specifically endorse a tax increase.

But the treasurer pointed to state officials' warnings that additional cuts would force early release of prisoners and fewer law-enforcement officers on the street.

"We're obviously down to bare bones," he said. "I don't know how much more you can cut."

The Legislature engaged in repeated rounds of tax cutting in the 1990s, when the economy was surging. At the same time the government made the largest single construction spending commitment in state history by authorizing the $1.5 billion rebuilding of Interstate 15.

Those changes worked together to squeeze the budget from both ends and "did mortal damage to the general fund," Alter said.

Utah's last gas tax increase was in 1997. The state has not hiked income and sales taxes since the late 1980s.

(Copyright 2003 by The Associated Press. All Rights Reserved.)

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