Utah Senate advances income tax overhaul with bracket spread and optional flat rate; indexing amendment added

The Utah State Senate, meeting in a September 2006 special session at the State Capitol in Salt Lake City, advanced Senate Bill 4001, a package of individual income tax changes that would spread tax brackets and offer taxpayers a choice to compute liability under a new 5.35% flat tax or the traditional graduated schedule.

Senator Curtis Bramble, sponsor of SB 4001, told colleagues the bill spreads brackets so that the top 7% marginal rate for joint filers would not be reached until about $11,042 in taxable income under the proposal. Bramble said the bracket-spread portion carried an approximate fiscal effect of $40 million, and the optional flat-tax component—set at 5.35% in the bill—was estimated to add about $36 million, producing a combined fiscal-note estimate of roughly $76 million based on February 2006 revenue numbers.

Why it matters: supporters say lowering marginal rates and simplifying parts of the code will spur economic growth and ultimately broaden the tax base; opponents say the near-term loss of revenue could undercut education and other state priorities. Several senators pressed for safeguards to…