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Show State Income Tax returns may be more complicated next year overall result will be a $16.04 per month gain in take-home pay. On the other hand, the net take-home take-home pay will be reduced slightly for an individual earning $36,000 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 stem primarily from the following: 1. An increase in the low income in-come allowance from $1,300 to $1,600 for a single person and $1,900 for a married couple filing a joint return. 2. An increase in the standard deduction from 15 percent to 16 percent, 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. Utahns will have to struggle with greatly complicated state income tax returns next year. This point was brought out in a study prepared by Utah Foundation, Foun-dation, the private tax research organization. Complications in next year's state income tax returns will arise from the fact that the 1975 Legislature tied the definition of taxable income to the Federal Internal Revenue Code in effect on December 31, 1974. Changes made in the Federal Code by the U.S. Congress this year, therefore, will necessitate a series of "adjustments" in 1975 t state income tax returns to be filed by Utahns in April, 1976. 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 1975 are only temporary. As a result, new "adjustments'' may have to be made the following year when Utah taxpayers file . their 1976 state income tax 4. A new earned income tax credit in the lower brackets only with a maximum credit of $-J(X), which phases out completely when income reaches $8,0(10. On the other hand, the state withholding rate was raised from 16 percent to 22 percent of Federal Taxes withheld because of the following: 1. State income tax rates were raised by the 1975 Utah Legislature. 2. A higher state withholding rate is needed to compensate for the smaller amount of Federal taxes that will be withheld. The Foundation study cm-phasiid cm-phasiid that the changes merely reflect revisions in the amount of taxes withheld, and that additional adjustments may have to be made with the individual in-dividual files his Federal and State income tax returns in April, 1976. Fast records indicate that Utahns itemize their deductions to a much greater extent than taxpayers of the nation as a whole. As a result, the UiT.T Federal changes in raising low-income and standard percentage per-centage deductions are not likely to benefit Utahns to the same extent as they will individuals in other states. returns. In 1970 the Utah electorate approved an amendment to the State Constitution designed to simplify the state income tax return by facilitating the coordination coor-dination of the state income tax with the Federal tax. The 1973 Utah Legislature enacted a new state income tax law which incorporated in-corporated 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 was 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 with. 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 adjusted as needed to meet state revenue requirements. 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 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. Fart of the reduction in Federal tax withholding, however, is offset by an increase in the State withholding rate. In the case of some high-income taxpayers, the increase in State withholding more than offsets the reduction in Federal withholding. As an illustration, the Utah Foundation study notes that a man with a wife and tw o children earning $15,000 a year ($1,250 per month) will receive a $21.41 per month reduction in the amount of Federal taxes w ithheld from his paycheck. This will be partially offset by an increase of $5.36 per month in State withholding. The |