This is an archived article that was published on sltrib.com in 2017, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Raising the state's income tax rate to gain additional funding for Utah's education system is too big of a risk to take.
Despite Utah being one of the most fiscally conservative states in the nation, our tax burden is higher than the national average. According data from the U.S. Census Bureau, Utah's income tax burden is 15th highest in the nation. There is an economic danger in increasing that burden.
In the mid 2000's, Utah lowered its income tax rate from 7 percent to 5 percent. Since then, Utah has seen tremendous economic growth. We survived the Great Recession better than any other state, were named the best-managed state in the union and have been acknowledged as the top state for business multiple times.
The education fund has also grown over that same period. From 2007 to 2014 the state's education fund grew by more than $750 million, or by 26 percent.
If we want to ensure that Utah remains competitive with other states for top jobs, if we want to continue to expand "Silicon Slopes," if we want to make certain our children and grandchildren have jobs that keep them here, we need to look for ways to lower Utah's income tax rate.
If there is a desire across the state to increase education funding there are a number of other options to consider.
First, lawmakers could look at broadening the base and lowering the rate of the state's income tax.
By removing or lowering the amount allowed in deductions, credits and exemptions the state could raise funds for schools but still decrease the state's income tax rate. This could prove to be beneficial to the state as businesses often compare states by income tax rates when determining where to locate.
Due to Utah's dependent exemption, the more children a household has in the public education system, the less that household is paying for its children's education. By lowering the amount taken for this exemption, Utah would broaden its income tax base to provide that those who directly utilize a service, in this case public education, pay a fairer share for it. For example, reducing the value of the deduction by one-third would raise nearly $150 million annually.
Second, the state could restore the sales tax on food. Utah has a state sales tax rate of 4.7 percent, but that rate drops to 1.75 percent for unprepared food. If lawmakers restored the rate, it is estimated the state could raise $190 million annually.
If this option were to be considered, lawmakers would need to take steps to protect families that may struggle to put food on the table.
Next, Utah could end the practice of giving up school property tax dollars through tax increment financing projects. Far too often local school district boards are willing to give away their portion of property taxes for a new development within their district. They give away millions in property taxes to assist in the construction of malls, grocery stores or auto dealerships which don't produce enough jobs to justify the gift.
The Legislature could also consider ending the sales tax subsidies that are paying for Utah's road and water projects and shifting those costs onto the users of Utah's highways and water systems. Currently sales taxes used to subsidize transportation projects are nearly $500 million annually.
Finally, Utah school districts have the option of increasing property taxes. School districts have approximately $849 million in unused property taxing authority. Those districts that find additional funding is needed can increase their property taxes, but must take into consideration the district's taxpayers and specifically identify what, if any, proposed new revenues would be used for prior to beginning the process of raising taxes.
If any additional funds are raised for Utah's public education system, it should not be done in a way that merely pours additional funding into a status quo system. If taxpayers are to make this significant investment, it needs to be done in a targeted manner with measurable results. Taxpayers deserve the assurance that these dollars are being spent to improve the education of Utah's students and not wasted on programs or staff that have no impact on student outcomes.
Mike Edmonds is chairman of the board of directors for the Utah Taxpayers Association. Billy Hesterman is vice president of the Utah Taxpayers Association.