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Utah senators rejected a move Wednesday to raise the state income tax on the richest 1.5 percent of residents to better fund schools.
Sen. Jim Dabakis, D-Salt Lake City, asked the Senate Revenue and Taxation Committee to vote on his SB104. But members after speaking against it decided to adjourn instead, leaving Dabakis to declare his bill as dead for the year.
Utah currently has a 5 percent income tax on all wage earners, and all of it goes to education.
Dabakis proposed to raise the rate to 6 percent for taxable incomes between $250,000 and $1 million, and to 7 percent for taxable incomes over $1 million. He said it would affect 38,000 people, the richest 1.5 percent of Utahns.
Fiscal analysts projected that it would raise an extra $178.8 million a year for education. Dabakis said that might help Utah avoid finishing last among the states for per-pupil spending, as it has done for years.
"This would in effect allow those citizens who are enjoying Utah to put back a little more for education," Dabakis argued. He said Utah education is underfunded by billions of dollars, and "the state is simply sticking its head in the sand and refusing to have that big discussion."
He said when the state moved to a single-rate for income tax a decade ago, then-Gov. Jon Huntsman and others predicted that it would attract many wealthy people and their businesses to avoid higher taxes elsewhere. "It has not worked very well," Dabakis said.
Others disagreed. Sen. Howard Stephenson, R-Draper, said it did attract more wealthy people, has helped economic development, has helped to reduce unemployment and has led to a stronger economy in Utah than in most states.
Senate President Wayne Niederhauser, R-Sandy, who sponsored the bill a decade ago to go to a single-rate for income tax, said changing it would chase away richer people and their businesses to the states with lower taxes.
"We can't be raising the rate at this point to stay competitive with other states," he said.
The bill was supported by such groups as the Utah League of Women Voters and Voices for Utah Children. The Alliance for a Better Utah noted it is considering suing Utah to improve education funding, arguing lawmakers have failed in their constitutional duty to fund it, and said the Dabakis bill could be a partial solution.