Utah bankers are supporting a proposal to eliminate state corporate income taxes - but on the condition that it would result in more jobs.
State Sen. Curtis S. Bramble was expected to introduce a bill in Utah's Legislature on Monday that would phase out the tax by 2012.
Sen. Bramble, a Republican, is presenting the measure to the Senate Revenue and Taxation Committee, of which he is the chairman.
The bill, which has 21 cosponsors, should be popular with lawmakers because it is the centerpiece of an economic revitalization plan that the newly elected Republican governor, John Huntsman Jr., emphasized in his campaign, Sen. Bramble said.
"Phasing out corporate income taxes should give Mr. Huntsman's administration the ability to better market Utah … to bring more businesses to the state," the senator said.
Utah's economy has been improving. Job growth rebounded to 2.5% in 2004 from 0% the year before; nationally the rate was 1% last year, according to the Census Bureau.
But Gov. Huntsman and some lawmakers believe that repealing the tax would make Utah more competitive in attracting businesses, particularly with surrounding states that have done the same thing, Sen. Bramble said.
Wyoming and Nevada are among a handful of states with no corporate income tax. (Nevada bankers are lobbying to repeal new bank excise and branch taxes there.)
Like other states, Utah would make up the lost revenue by increasing or introducing other taxes, said Chris Roybal, the governor's senior adviser for economic development. Within the next two years the administration is expected to propose a reform package, which may include items such as a hotel occupancy or professional services tax.
Howard Headlee, the president of the Utah Bankers Association, said the group does not have an official position on the repeal but that members are generally behind it - with caveats.
"We're supportive of whatever is best for the state," Mr. Headlee said. "Time will tell if this leads to more economic development, but if it doesn't, the banking industry is very concerned about what it would do to the quality of education."
The association likes that lawmakers have promised to reinstitute corporate income taxes if jobs are not forthcoming, he said. Under Sen. Bramble's bill the phaseout would not begin until 2006, and the Legislature would have some time to reverse the repeal if the governor's tax reform package is unsatisfactory.
Separately, on Feb. 1 the Utah House Revenue and Taxation Standing Committee voted 7 to 6 to table a bill introduced by Rep. Wayne Harper, a Republican, that would have exempted banks from paying income tax.
Rep. Harper told the committee that the bill was intended to "level the playing field" between banks and credit unions.
Mr. Headlee said that though UBA members appreciate the recognition of the tax inequity between banks and credit unions, they do not prefer special treatment. Rather, he said, bankers would like to see the state's largest credit unions pay taxes.
In 2003 the Legislature passed a law to tax state-chartered credit unions with more than $100 million of assets, but many affected credit unions avoided the tax by converting to federal charters.
Utah bankers are lobbying lawmakers to pass a resolution calling on Congress to study the federal tax exemption for large credit unions. The Utah House passed the resolution 41 to 34 this month, and Mr. Bramble's committee was expected to consider it Monday.
