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In their quest for tax reform, state lawmakers took a look Tuesday at exchanging Utah's current income, sales and property tax system for a simple consumption tax.
"We're just trying to change the way taxes are collected" - not the amount collected, Thomas Wright told members of the Revenue and Taxation Interim Committee.
For 18 years, Wright, former executive director of Texas-based fairtax.org, has spearheaded a national grass-roots effort to shift all federal taxes to a broad sales tax on goods and services.
Such a move would effectively get rid of the Internal Revenue Service and allow workers to keep their whole paychecks. But goods and services would cost more, being taxed to fund all government programs.
Such a tax shift would yield a vibrant, fast-growing economy and skyrocketing investments, Wright said.
Business purchases of goods and services used in operations would be exempt from the consumption tax, which is a kind of sales tax aimed only at the end user.
A legislative working group has analyzed the theory for several months but has yet to formulate a proposal, said Rep. John Dougall, R-Highland, who co-chairs the committee.
And so far, no state has a broad-based consumption tax, said Bryant Howe, assistant director of the Office of Legislative Research and General Counsel.
Howe presented the pros and cons of taxing consumption rather than property and income. While it would encourage savings and investment among wealthy residents, the less-well-off would struggle.
"I don't think that the pure consumption tax is viable on a state level," said Alison Rowland, budget and research director for the nonprofit Voices for Utah Children.
"People are considering it a cure-all but I didn't see any solid proposals to mitigate regressivity," Rowland added. "Low-income people live paycheck to paycheck, and they would be taxed on virtually everything they do."
Mark Buchi, a Salt Lake City tax attorney and former state tax commissioner, favors the state's current three-pronged balance of income, property and sales tax.
"It provides stability in the down times and we can do special projects in the good times when things are going well," Buchi said.
A lone consumption tax would be more volatile, Buchi said, netting a windfall when consumer spending is high, but starving the government's ability to provide basic services when people tighten their belts.
A consumption tax to replace all other Utah taxes
* Pros: Simple, efficient tax relief for businesses and encourage savings
* Cons: Would hit lower-income residents hardest, would have dramatic ups and downs
* What's next? Legislative workgroup will complete its analysis and make recommendations