least one appeal. Commissioner Oveson added that by September 1, 1998, the Tax Commission
plans to have in place an administrative rule on methodology.
3. Research and Development Tax Credits
a) Information - Mr. Asplund explained that during the 1998 General Session, the Legislature passed two bills dealing with state research and development tax credits. This
legislation requires the Revenue and Taxation Interim Committee to conduct a study on the
credits and the committee has requested that the TRC assist them in their study of these credits.
Mr. Asplund then discussed the federal tax credit and suggested the members read the reports
"Economic Benefits of the R&D Tax Credit" and "CRS Issue Brief for Congress." He reviewed
the handout "Research and Experimentation Tax Credit" which outlines the federal tax credit.
He reported that spending on development research is rising, but spending on theoretical and
basic research has been declining. He said that although studies vary widely as to the
effectiveness of the credit, all of the studies indicate some positive result. Mr. Asplund discussed
policy issues pertaining to the federal tax credit including: (1) lack of permanence; (2) high
threshold levels and static base amount; and (3) refundability of the credit.
b) Study Time Table - The TRC will discuss other states
' research and development tax credits
at the next meeting.
4. Personal Income Tax
a) Marriage Penalty Issue -
Ms. Rockwell made a presentation to the committee titled "The Marriage Tax Penalty, Defining the Problem and Finding a Solution." She reported that
according to the Congressional Budget Office, more than 20 million couples pay higher taxes
than they would if they were single, with penalties totaling about $29 billion in 1996. In
contrast, 25 million couples get a marriage bonus, totaling about $33 billion. She stated that the
most important factor in determining a tax provision's effect on married couples is how income is
divided between the spouses. She explained that couples having disparate incomes generally
receive marriage bonuses while couples with roughly equivalent incomes generally incur
marriage penalties. She noted that Congress' focus is on eliminating marriage tax penalties. Ms.
Rockwell identified and reviewed the major sources of marriage penalties under the Internal
Revenue Code
and
under the state individual income tax. She reviewed the proposals currently before Congress to eliminate penalties under the Internal Revenue Code, and then presented
some options for reducing or eliminating penalties arising under the state individual income tax.
Ms. Rockwell provided copies of a draft letter from the Revenue and Taxation Interim
Committee urging Congress to eliminate or reduce marriage penalties under the federal
provisions and to adopt an approach that minimizes negative impacts to the states. She also
informed the TRC that a bill request has been opened to eliminate marriage penalties under state
law for the retirement income deduction and the retirement income personal exemption.
b) Tax Burden Study - Dorothy Owen highlighted information in "State Income Tax Burdens on Low-Income Families in 1997: Assessing the Burden and Opportunities for Relief"
showing that Utah taxes families with incomes below the poverty level. She said an earned
income credit at the state level may offset the regressiveness of some of the state sales taxes.
MOTION: Ms. Owen moved that the TRC study the tax burden on low income families and make recommendations to the Legislature.
REVISED MOTION: Ms. Owen moved that the TRC study the tax burden on low income families and regressive state taxes. The motion passed unanimously.
5. Sales Tax Exemption Study Approach
Mr. Asplund explained that the law requires the TRC, in cooperation with the Governor's
Office and the Tax Commission, to conduct a cyclical review of the state sales and use tax
exemptions. The next review
cycle begins in 2001. He referred to the handout "Current Sales and Use Tax Exemptions and Review Provisions," and asked the TRC whether they wanted to
study this review process.
MOTION: Judge Memmott moved that the TRC include the sales and use tax exemption study process on this year's agenda. The motion passed unanimously.
Rep. Short requested that the TRC's recommendations in this area be sent first
to the Legislative Process Committee rather than to the Legislature at large.
6. Other Business
a) Appointments - Vice-chair Lee stated that there are four vacancies in the TRC and that the TRC has the responsibility to fill two of those positions. Ms. Owen requested that she be
reappointed. The chairs asked that recommendations be sent to Mr. Asplund.
b) Other - The next TRC meeting will be held on August 14, 1998 at 9:00 a.m.
7. Adjournment -
Vice-chair Lee adjourned the meeting at 3:40 p.m.