Flat-tax rate a big jump for many Utahns

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When Claire Geddes prepared her taxes, she was taken aback at the amount she'd have to pay using this year's new flat-tax system.

Instead of owing $400, she would have had to pay $1,700 to the state.

"It was pretty startling," said Geddes, 61, who lives in Cottonwood Heights with her husband on a fixed income from Social Security and her husband's pension. "Having them do that to seniors is horrendous. I don't know how they expect people to get along."

Geddes, like other Utahns, faces a choice this year. She can go with the new flat tax or stick with the old version. All but a small number of taxpayers would pay more under the flat-tax option. But none of the policy makers responsible for the change or those administering it have done much to advise the public of that.

The dual-track system was developed in 2006 as a stepping stone toward everyone paying a flat tax, but was heavily criticized by many. Next year, all Utahns will pay a flat tax of 5 percent with a few credits for mortgage payments or charitable donations among others.

But for this year, the Utah Tax Commission recognizes most taxpayers could pay significantly more using the flat tax. However, they never issued any warning letting Utahns know that.

"We didn't do anything along those lines because we just collect the taxes and distribute them," said Charlie Roberts, tax commission spokesman.

Lisa Roskelley, spokeswoman for Gov. Jon Huntsman Jr., said no state agency alerted taxpayers they would pay more under the flat tax.

"It's not fair to say they will be [negatively affected]. They could say, 'I would rather pay more taxes,' and choose the flat tax this year," she said. "The reason it's optional is they can choose which is best for them."

Phil Dean, a policy analyst at the Office of Legislative Research and General Counsel, pointed to two briefing papers detailing the dual system this year. He also provided a fact sheet, but it never warned taxpayers they likely would pay more with this year's flat tax. Those reports are available online at http://www.le.state.ut.us, but are not widely distributed.

"This year, we estimate about 4 percent of people will benefit from the flat tax, but next year it should be 90 percent of people," he said, adding those benefiting most would be in higher-income levels.

Those filing this year must pay only the lesser of the two amounts. Tax commission leaders assure Utahns that next year's system will not see such dramatic increases.

"We're telling folks not to compare their returns because they don't know what type of deductions and credits they'll get next year," Roberts said.

Most people will get a taxpayer tax credit or a retiree tax credit among others, he said.

However, that doesn't stop people from having to fork over more money this year if they choose to use the new flat-rate system.

"I haven't done one of the 210 tax returns I've prepared that would have been better off this year using the new system," said Vearl Jensen, a tax preparer in Midvale.

He also said the tax preparation software he used was not up-to-date and was producing incorrect numbers. Other programs, such as TurboTax, use the old bracketed system. Anyone preparing their own taxes should double-check their state returns if numbers look significantly different from past years.

But even with the concerns this year, he is happier about next year's numbers that he figured out using an online tax calculator.

"When I run it through the calculator, it's only off by about $20 one way or the other," he said.

Geddes, who worked for government watchdog group Utah Legislative Watch among others, is happy she calculated her taxes under both systems before filing. But she's frustrated the flat-tax calculation was so high. She's talked with several retired friends who faced the same jump if they used this year's new system.

"When you take advantage of the most vulnerable part of society by tripling taxes to give [the rich] a break, it's offensive," she said.

smcfarland@sltrib.com