Utah Priorities Project: Taxes & Spending
When Utah’s economy was roaring along in the middle of the decade, then-Governor Jon Huntsman and legislative leaders were looking for ways to reduce the burden of taxes on Utah’s economy. It seemed as though there was plenty of new money to raise pay for teachers, build new roads and expand the reach of social services.
The top rate for state income taxes had been 7.5%. That was reduced to a flat rate of 5%. The state sales tax on food was also reduced, and the state was still showing big surpluses in revenue – until the recession hit and the bottom fell out.
Utah Foundation President Steve Kroes is an expert on taxation. He’s a former vice-president of the California Taxpayer’s Association with degrees in economics and public administration. In his issue brief on this subject, Kroes says the legislature managed to hold the line on taxes even as it reduced overall state spending by about fourteen percent.
“This has been a pretty difficult time for Utah,” Kroes explains. “Utah decided not to raise taxes to meet some of those critical budget demands and so a lot of reducing was done in state spending, where 33 other states during the aftermath of the recession decided to raise taxes. That’s probably one reason why our ranking dropped so dramatically from 12th highest to 31st highest in terms of tax burden.
Utah’s state income tax is devoted entirely to education, while property taxes fund schools and local government. Kroes points out that Utah’s property taxes are relatively low compared to many other states.
“We have a very low residential property tax,” he says. “We tax businesses at a higher rate effectively because they don’t get the large homeowner exemption. But we do utilize the property tax in this state quite a bit less than other states.”
If the normally tax-averse members of the Utah legislature are enthusiastic about anything, though, it would be taxing the huge amount of federal public land within the state of Utah. They passed a bill demanding sovereignty over that land in the last session. Republican Representative Ken Ivory saw dollar signs as he argued in favor of House Bill 148.
“We’re 2.2 billion dollars from average in per-pupil funding,” Ivie said during debate on the House floor. “And yet, the states that neighbor us to the east that have access to their lands and their resources, they were already at average in per pupil funding. They added another 3700 dollars per pupil in student funding.”
Steve Kroes has some sympathy for lawmakers who see much of Utah’s wealth locked up in federal land. But he says lawmakers shouldn’t be using it as an excuse.
“I personally do not think that the public lands issue is the reason why our school funding is low,” Kroes tells KUER. “But I do think that greater opportunity to tap into those lands for economic activity could bring some additional money in, certainly. I think the reason our school funding is where it is because of our desire for low property taxes and our political distrust of growing budgets.”
Another tax-related problem Utah faces going into the future is paying for roads. The I-15 CORE project in Utah County was paid for almost entirely with state money, even as the revenue from the state’s motor fuel tax has begun to slip. Kroes says the structure of the tax is the problem. The current stategas tax rate is 24 cents per gallon, but cars just keep getting more efficient – paying less tax even as they travel more miles.
“It would be useful if a new revenue source were able to capture the amount of miles traveled by motorists and find some way to tax on that basis,” Kroes says. “It’s difficult to figure out how to do that. I think that’s the future of transportation funding, but it’s difficult to find the political will to take steps like that now.”
In the end, Kroes says Utah will get the quality of government programs it’s willing to pay for, though many voters seem to want it both ways with taxes and spending.
Kroes told KUER, “We asked a question of voters in the survey: What are your preferences on state spending? And overwhelmingly, they wanted K-12 education spending to increase. The next tier down, there’s still a fairly strong desire for increase, but they wanted increases in funding for health care and higher education and law enforcement. But then when you ask the question, should the overall state budget increase or decrease, there was quite a strong sentiment that the overall budget needs to decrease. You can’t increase education, health care, higher education and law enforcement, which are nearly 80% of the general and education part of the budget . . . you can’t increase those while you’re decreasing the entire state budget. It just doesn’t work. The math can’t work.”
Utah Foundation issues brief on taxes and spending