| OCR Text |
Show State Tax Return May Be More Complicated Next Year Putins will have to struggle ilh greatly complicated state inme til returns next year. This point s brought out in a stuJv prTrfd bv Uuh Foundation, the private tax rrsrirvh organization. Complications in next year's sine income tax returns will jrise front 'he ,lWt tht" ,he i5 legislature tied the definition of taxable income to the Federal Internal Revenue Code in effect on December 11 iJN. Changes made in the Federal Code by the U.S. Congress this year, therefore, necessitate a series of jdjustments" in ITS state income tax returns to be filed t,v ftshns in April. lTo. Further complicating the picture in Utah, according to the Foundation, is the fact that some of the changes made in the Federal Tax Reduction Act of l)7S are only temporary. As a result, new "adjustments" may have to be made the following year when Utah taxpayers file their l-7b state income tax returns. In WO the Utah electorate approved an amendment to the State Constitution designed de-signed to simplify the state income tax return by facilitating facilitat-ing the coordination of the state income tax with the Federal tax. The 1973 Utah Legislature enacted a new state income tax law which incorporated most of the Federal features into the Utah code. The action taken by the 1975 Utah Legislature to tie the definition of taxable income to a specific date w as designed to make state income tax less vulnerable to changes made in the law by the U.S. Congress. This move, however, reduced the simplification in the Utah law, which was one of the major reasons why the change was made in the Utah law to begin w ith. Some states have met the problem of changes in the Federal tax law by making the State tax a percentage of the Federal tax liability with the state rate adiusted as needed to meet state revenue requirements. require-ments. In Nebraska, for example, the tax rate is set each year as a flat percentage of the Federal tax liability by the State Board of Equalization Equaliza-tion and Assessment. The rate established, therefore, can reflect any changes made in the Federal law during the year in order to prevent any loss in state revenues. Foundation analysts point out that most employees in Utah will receive an increase in take-home pay during May because of reduced Federal tax withholding. Part of the reduction in Federal tax withholding, how ever, is offset by an increase in the State withholding rate. In the case of some high-income taxpayers. the increase in State withholding withhold-ing more than offsets the reduction in Federal w ithholding. ithhold-ing. As an illustration, the Utah Foundation study notes that a man with a wile and two children earning $ 15.1HK) a year ($1,250 per month) will receive a $21. -11 per month reduction in the amount of Federal taxes withheld from his paycheck. This will be partially offset by an increase of $5. .16 per month in State withholding. The overall result will be a $16.04 per month gain in take-home pay. On the other hand, the net take-home pay will be reduced slightly for an individual earning $.16,000 or more per year. The reduction in Federal withholding went into effect on May 1 to reflect Federal tax cuts enacted by Congress earlier this year. The reductions reduc-tions stem primarily from the following: 1. An increase in the low income allowance from $1,300 to Sl.bOO for a single person and $1,900 for a married couple filing a joint return. 2. An increase in the standard deduction from 15 to 16, with the maximum increased from $2,000 to $2,300 for a single person and to $2,600 for a married couple filing a joint return. 3. A new tax credit of $30 for the taxpayer, his or her spouse, and each dependent. 4. A new earned income tax credit in the lower brackets only w ith a maximum credit of $400. which phases out completely com-pletely when income reaches $8,000. On the other hand, the state withholding rate was raised from 16 to 22 of Federal taxes withheld because of the follow ing: 1. State income tax rates were raised by the 1975 Utah Legislature. 2. A higher state withholding withhold-ing rate is needed to compensate compen-sate for the smaller amount of Federal taxes that will be withheld. The Foundation study emphasized em-phasized that the changes merely reflect revisions in the amount of taxes w ithheld, and that additional adjustments may have to be made w hen the individual files his Federal and State income tax returns in April, 1976. Past records indicate that Utahns itemize their deductions to a much greater extent than taxpayers of the nation as a w hole. As a result, the 1975 Federal changes in raising low-income and standard percentage de-' de-' ductions are not likely to benefit Utahns to the same extent as they will individuals in other states. |
