Peter Reichard: Getting clear on what the income tax amendment does and doesn’t do

(Al Hartmann | Tribune file photo) Spanish teacher Luisa Montalvo leads a third grade class in an American rock and roll music dancing session as part of a cultural awareness week at Wasatch Peak Academy in North Salt Lake.

There are a number of constitutional amendments on the ballot confronting Utah voters this November. The Utah Foundation provided summaries and brief analyses of each in its recent report On the Ballot: Constitutional Amendments Nov. 3, 2020. But by far the most controversial item is Amendment G, which expands the potential uses of income tax revenue. Currently, Utah’s income taxes are dedicated to public and higher education alone. The amendment would broaden the named uses.

Though the public discourse around it suggests a lack of clarity regarding what is actually on the ballot, the issue before voters is a rather simple constitutional amendment. It would widen the named uses of income tax revenue to support the systems of public education and higher education so that it could also be used “to support children and to support individuals with a disability.” Looking at the proposed constitutional language alone, this simply expands the pool of potential items that may be funded from income tax revenue.

Some look to minimize the change by pointing out that current constitutional language already defines public education (for these revenue dedication purposes) broadly. It includes all public elementary and secondary schools “and such other schools and programs as the Legislature may designate.” This last phrase could be interpreted — albeit subject to lawsuit — as allowing the uses of income tax revenues beyond education. But the constitutional amendment leaves this language intact and opens the field further to additional named categories of potential expenditure.

Some also point out that the income tax “revenue” dedication is not the same as an actual “funding” dedication, and therefore people concerned about education funding should not fret about the constitutional change. There is some truth to this. Utah dedicates its income tax “revenue” to education, but Utah could cut its income tax rate (as it already has) or join the ranks of states with no income tax at all. Furthermore, the Utah Foundation has documented how it has been possible to play a sort of budgetary shell game with education funding over the years, for better or worse.

That said, the amendment is designed to provide the state with greater budgetary flexibility, allowing a broader use of income taxes. This means that the constitutional revenue dedication can be diluted with uses outside of education. Indeed, if this were not the case, one would wonder why voters are being asked to consider this amendment at all.

By the way, there is nothing wrong with budgetary flexibility. Many a tax policy analyst would arch an eyebrow at the extraordinary dedication of Utah’s entire income tax stream to a single category of expenditure. The Utah Foundation’s own research has highlighted how earmarks can reduce budgetary flexibility, and the increasing pressure on the state general fund is due in some measure to this lack of flexibility.

Much more can be written about the amendment itself. However, a lot of the discussion around it pertains not to the amendment, but to related legislation. It is not unusual for a constitutional amendment to come with companion legislation, and that is the case here. Passage of the amendment would put into effect legislation that statutorily commits legislators to invest in the growth of public education and provide a safety net to protect this funding. The legislation provides base-level funding; it helps ensure funding increases that reflect student enrollment growth and inflation, in addition to providing money for an education stabilization rainy-day fund; and it statutorily calls for a 6% increase in education funding in the coming years. The notion is that voters would exchange a constitutional revenue dedication for a statutory funding dedication.

There are a couple of important points to consider about this legislation. First, similar legislation could be passed without the constitutional amendment. In other words, it is this legislation — not the constitutional amendment itself — that provides a layer of protection to education funding. Second, the legislation would be subject to change by a future vote of the Legislature. But then, that’s the advantage of statutory change versus a constitutional amendment: You can respond to shifting conditions in a timely manner. Amending the constitution requires not only legislative approval, but also the consent of voters, a much higher hurdle.

And that brings us back to the question at hand: Whether the level of protection the current constitutional language provides for education is worth the trade-off in state budgetary constraints. The Utah Foundation takes no position on the amendment, but we do believe voters should get clear on what the amendment does and does not do.

Peter Reichard is president of the Utah Foundation, a nonpartisan, nonprofit public policy research organization. Reach him at peter@utahfoundation.org. Find the Utah Foundation’s ballot report at utahfoundation.org.