Does utah need tax reform?
What You Need to Know about
Utah’s Debate Over Tax Reform.
Many Utah lawmakers believe that Utah’s tax system is outdated and must be reformed. So much so, that some legislators have proposed radical and risky tax measures such as taxing all services or implementing a State property tax.
Does Utah need radical tax reform. In a word, “NO!”
Read on to find out why.
Sales Tax Collections at All‑Time Highs!
Utah lawmakers declare that sales tax collections are not keeping pace with the Utah’s needs. Not so! Despite what you may have heard, collections of Utah sales tax are at all‑time highs.
On average, Utah families are paying a whopping 68% more in sales tax today than they did in 2010.
With the recent U.S. Supreme Court ruling requiring large online retailers to collect and remit sales tax, our State is poised to receive hundreds of millions of additional sales taxes collections in coming years.
Sales of Taxable Goods are Increasing, not Decreasing.
Utah lawmakers declare that we must “modernize” Utah tax policy because Utah is becoming a service economy and Utahans aren’t buying enough goods anymore. Not so!
In recent years sales of taxable goods are increasing not declining. Yes, modern technology has produced new services, but it has also produced a myriad of new goods such as cell phones, computers, iPads, gaming systems, etc.
Contrary to what some lawmakers claim, Utahans are buying record levels of taxable goods, and the State is collecting record levels of sales tax as a consequence.
The Legislature has a
Over the past 10 years Utah taxes have increased three times faster than Utah’s population.
If this trend continues it will stifle Utah’s economy, needlessly raise housing and living expenses, and increase the burden on Utah families.
We don’t have a tax collection problem; our Legislature has a spending problem. Reigning in out-of-control government growth should be the primary focus of the Tax Reform Task Force.
The “Allocation” Problem.
Utah does have an allocation problem, if it truly is a problem at all. Utah’s Constitution requires all Utah income tax collections to be used to support education.
Our lawmakers argue that this “siloing” limits their flexibility to direct tax collections to other uses. Perhaps so, but we don’t need a massive expansion of Utah tax policy to fix this flexibility problem.
Some Simple Solutions
Amend the Constitution
The most obvious solution to the allocation problem is the amend the Utah Constitution. This would be challenging, no doubt. But it is preferable to a radical and risky overhaul of Utah’s current tax system.
Tax and Credit
Another idea; institute a “tax and credit” remedy already used in other states. Simply add two lines to each Utah tax return. Line 1; a “General Fund Reallocation Tax.” Let’s say its $200. Line2; a $200 “General Fund Reallocation Tax Credit.” The impact to Utah taxpayers is a net zero. However, the $200 is no longer income tax that is siloed for education. Rather, the $200 flows to the General Fund for more flexible use, with virtually no implementation cost and no impact on Utah businesses.