Last week the Utah Tax Reform and Equalization Task Force held its first series of eight planned public town halls to discuss whether Utah tax policy is in need of reform. I attended two of the meetings and came away quite disappointed, because both meetings were more a propaganda campaign than a listening tour.
Upon arriving at the meetings, attendees were presented with a glossy “Fact Sheet,” banners and slick, professionally produced videos asserting that Utah’s current tax system is broken and must be reformed. The materials claim, without question, that the “ways Utah has funded the state budget no longer meet today’s needs.”
Of course, this flies in the face of the task force’s stated, fundamental objective of taking public comment to “verify the challenge and need” for Utah tax reform. More to the point, the assertion is contrary to the facts and data.
Utah tax collections are at all-time highs. Just last year, our state government had a massive $1.2 billion surplus. Over the past 20 years, despite the challenges of growth and the 2008 real estate downturn, Utah’s current tax system provided balanced budgets, a triple A credit rating, a vibrant economy and an overall reputation as a great state in which to live and do business. This hardly sounds like a broken system in need of massive reform.
So, what’s the problem?
The real issue is that, due to our vibrant economy, Utah income tax collections are robust and are outpacing sales tax collections. This is not a problem, in an of itself. There is nothing that says you should collect $1 of sales tax for every $1 of income tax collected. Here’s the rub: Utah’s Constitution provides that all Utah taxes on income must be used for education. Therefore, our lawmakers cannot spend income tax collections at their discretion; a limitation in flexibility that many of our legislators dislike.
Slower growth in sales tax collections, claims the Fact Sheet, “will struggle to meet the demand for non-education programs.” Again, an assertion that is directly contradicted by the facts.
Sales tax collections in Utah have been steadily rising, with current collections at all-time highs. In fact, over the past 10 years, Utah sales tax collections have risen three times faster than Utah’s population. In 2018, sales tax collections per household were up a whopping 68%, as compared to 2010. Additionally, contrary to the impression given in the Fact Sheet, over the past 10 years, sales of taxable goods in Utah are not declining, they are increasing and at all-time highs.
Yes, modern technology has given us new services, but it has also given us a plethora of new taxable goods. Utah is also expecting millions of dollars of new sales tax receipts due to the recent U.S. Supreme Court ruling requiring large online retailers to collect and remit sales tax to the states.
Doesn’t it make sense to wait and see what impact this has on our state budget before rushing into needless, and risky, expansive tax reform?
Our legislators should stop the group think and propaganda designed to justify an unnecessarily expansive reform of Utah tax policy. Utah’s tax system is not broken. Utah’s unique constitutional provision does create a “flexibility problem,” if this truly is a problem at all. However, the flexibility problem can be remedied without resorting to a massive expansion of Utah tax, such as sales tax on services or a state property tax.
Such measures would devastate Utah’s economy, render Utah businesses unable to compete, cause capital to flee the state, and needlessly increase the tax burden on Utah families.
Brett W. Hastings is a Utah resident, attorney and co‑founder of Utah Legislative Watch.