Tax Reform Plan The plan will: 1.Reduce the tax rate on unprepared food 2.Broaden the tax base 3.Make Utah more economically competitive

Tax Reform Overview 1.Reduce the tax on unprepared food by 2% ($70 million) 2.Reform the individual income tax system ($70 million) –Begins January 2007 (First Return in April 2008) –Base is Federal Adjusted Gross Income –Tax rate of 4.975% –Tax Payer Tax Credits: Single = $400 Head of Household = $600 Married = $900 Per Person = $100 Phase out: total credit amount phases out at income level from 20x to 95x the credits –Per person credit doesn’t phase out with income –Homeowner Tax Credit: The greater of: –$200 homeowner credit, or –Tax rate (4.975%) x 50% of mortgage interest paid –Charitable Contribution Tax Credit: Tax rate (4.975%) x 50% of charitable contributions 3.Provide economic development incentives ($20 million)

All States Top Marginal Income Tax Rates: Proposed System Utah becomes much more competitive

Tax Reform Plan: Income and Food Impact to All Taxpayers

Tax Reform Plan: Income and Food Dollar and Percent Impact to the Median Taxpayer