that sales for Utah are down 1 percent for the month and 7 percent for the year but are still above
the national average. Mr. Macdonald said that residential construction is down 7 percent for the
latest month and down 9 percent for the year to date. Nonresidential construction is down 29
percent for the latest month and down 13 percent for the year. He said that taxable sales are up
4.8 percent for the month and 6.6 percent for the year to date which is lower than the average 10
percent increase in previous years. Payroll tax is down 17 percent for the latest month and down
4 percent for the year. He noted that payroll tax collections have been down for the past five
months.
Mr. Macdonald noted that the General and Uniform School Funds are $11.85 million in
excess of projections while the sales and use taxes are in a deficit by $14.16 million. The
Transportation Fund is in excess of projections by $.08 million while the motor fuel tax is in a
deficit of $2.19 million.
3. State Individual Income Tax Brackets --
a. Review of Income Tax Policy Statement -- Mr. Howe distributed copies of the Tax Review Commission's (TRC) income tax policy that was adopted by the Legislature in 1990.
He reviewed the policies stating that the state income tax system should: 1) be broadly based; 2)
shield subsistence income from taxation; 3) be structured so as to be moderately progressive; 4)
be indexed for inflation; and 5) be linked to the federal income tax system. He added that
Congress may make substantive changes to the federal tax system which could affect policy
no. 5.
b. Review of Possible Options for Changes to the State Individual Income Tax System-- Tax commission Senior Economist Tom Williams distributed a handout titled "Income Tax
Proposals." He said that the first three proposals are straight forward and did not comment on
them. He outlined the other proposals. He noted that all seven proposals are revenue neutral.
Proposal no. 6 would allow Utah income taxes to be a percentage of federal taxes. This would
require a state tax rate of 31 percent. Proposal no. 7 would allow Utah income taxes to be a
percentage of federal taxable income. This would require a state income tax rate of 6.4 percent.
Mr. Williams added that both proposal no. 6 and proposal no. 7 lower the tax for lower income
brackets.
Chair Nielson asked if statistical data would be lost if proposal no. 6 and proposal no. 7
was adopted. Mr. Williams said that the data can be taken from the federal forms if everything is
adopted on the federal form and nothing added at the state level. He also provided information
showing the effective tax rates and savings or losses.
c. Committee Discussion and Direction for Future Action -- Sen. Stephenson suggested looking more closely at option no. 7. He felt this option was more taxpayer friendly. He
recommended that staff prepare legislation for this option.
4. Intangible Assets and Property Tax Valuation
a. Update on Centrally Assessed Appeals -- Commissioner W. Val Oveson, Chair, tax commission, distributed a handout titled "Centrally Assessed Tax Appeals." He noted the TRC
discussed this issue at its June 13 meeting. He outlined the values still in the appeal process for a
total of $8 billion which translates to $120 million in maximum potential revenues lost by local
governments.
He explained that the WilTel decision has not made a significant change in appeals. He noted that appeals may have consistently been partly because of intangibles. He also reviewed
the impact of appeals by county, on the value of an average home and on a home with a
$100,000 value. Chair Short asked what percentage of moneys are actually returned. Mr. Brent
Eyre, tax commission, said that the average percent reduction of dispute is around 6 percent.
Generally the appeal amount is about 30 percent of the value.
b. Review of Case Law on Valuing Intangibles -- Ms. Lemke distributed a memo on the taxation of intangible property. She reviewed the federal law relating to the property taxation of
intangibles, including two cases recently filed in federal district court. Ms. Lemke then
discussed the state case law interpreting Utah's constitutional and statutory provisions governing
the property taxation of intangibles. Finally, she highlighted some of the administrative
decisions by the tax commission relating to intangibles.
5. Report of the Legislative Auditor General: Residential Tax Assessment -- Due to a lack of time, the chair moved this item to the next meeting.
6. Other Business -- The committee did not discuss any further business.
7. Adjournment --
MOTION: Rep. Buffmire moved to adjourn the meeting at 4:05 p.m. The motion passed unanimously.
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