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Show Inflation pushes up tax bill for Utahns Inflation has been far more important than all other factors combined in the rise of the state income tax liability for .the typical family in Utah during the past two years. This fact was emphasized in a study of inflation in-flation and taxation prepared by Utah Foundation, the private tax research organization. The Foundation study notes that inflation tends to shift taxpayers into higher tax brackets where a progressively larger percentage of income will go for taxes. In addition, Utahns will be subject to higher state taxes next year becuase of (1) the tax increase authorized by the 1975 Utah Legislature, (2) the through equity. Often this practice diverts business away from what is best on economic or fiscal grounds to what is attractive at-tractive in the light of prevailing tax laws. Foundation analysts point out that the tax laws of most other industrial nations are much more liberal with respect to funds needed for investment purposes than is the United States. As a result, these other nationsparticularly Japan and West Germany have been devoting a higher peopoerion od national product to capital investment. in-vestment. As these other nations expand and modernize their industrial plants, thereby af- toraing greater einciencies anu lower unit costs, the United States is placed at an increasing competitive disadvantage in world trade. According to the study, huge capital outlays by business will be needed in the decade ahead to solve the multitude of problems faced by the United States as well as provide employment opportunities for the growing labor force. An average capital investment of $25,000 or more is required to provide one job in private industry for each new job seeker. Each year there are approximately" 1,300,000 new entrants in the nation's labor market. New capital formation requires new savings. Present tax policy in the United States however, tends to discourage savings and production while encouraging consumption. The report emphasizes that the opportunity op-portunity to consume ultimately depends upon the ability of the nation to produce. inability ot individuals in Utah to take advantage of the generally more liberal provisions of the 1975 Federal Code on their state returns, and (3) the smaller deductions which will be allowed on the 1975 returns resulting from reduced Federal taxes. Although inflation pushes up tax bills and changes many of the traditional concepts of equity in the tax laws for individuals, the Foundation study observes that it may have an even more pronounced effect on business and industry. Among the factors affecting business are the following. Capital gains are taxed even though such gains merely represent inflated dollar value, not real purchasing power. Inventory "profits" are taxed even though such funds are needed to maintain inventory levels by replacing lower-cost goods sold with higher-priced merchandise or materials purchased. Use of historic cost rather than replacement cost in calculating depreciation allowances prevents business from replacing plant, machinery, and equipment as it wears out or become obsolete. Dividends paid to stockholders are taxed causing business to seek new capital through borrowing rather than |