As the late Illinois Sen. Everett Dirksen is often attributed saying, "A billion here, a billion there, and pretty soon you're talking real money."
I don’t know if a little more than $6 billion a year is considered real money in Washington, but it is in Utah. That’s how much personal income tax the state collects from its residents every year (plus another $800 million in corporate income taxes).
And that would be a heck of a lot to try to find somewhere else.
But Utah lawmakers may soon be giving it a try.
I don’t know if a little more than $6 billion a year is considered real money in Washington, but it is in Utah. That’s how much personal income tax the state collects from its residents every year (plus another $800 million in corporate income taxes).
And that would be a heck of a lot to try to find somewhere else.
But Utah lawmakers may soon be giving it a try.
Gov. Spencer Cox started this conversation recently when he told a group of lobbyists, elected officials and other leaders at a Utah Taxpayers Association conference, “I would love not to have income tax in the state.”
Forget about the penny-ante cuts lawmakers make to the flat-tax rate every year (last year it went from 4.85% to 4.65%, which returned about $400 million to taxpayers). “I would rather get rid of the income tax altogether,” he said.
As the saying goes, if you want less of something, tax it, and if you want more of something, tax it less. The income tax puts a price on productivity, or the fruits of workers’ labors. The less of that we tax, the more productive labor would become. Businesses would expand or relocate here. The population would grow and people would have more disposable income to pay for things that fill the state’s sales tax coffers.
Unless, that is, the state had to raise the sales tax so high to make up the difference that people stopped buying things.
Or if property taxes got so high that people couldn’t afford homes. Rents would rise and old folks on fixed incomes would be forced to leave. Surveys show people hate property taxes above all.
Pick your poison. It’s expensive to run a state, and the money has to come from somewhere. But most Republican lawmakers I’ve known through the years believe the state benefits most by lowering the cost of productivity, which makes it easier for people to spend more.
Utah’s new House speaker, Mike Schultz, recently told the Deseret News/KSL editorial board that the income tax is the most volatile of the three taxes.
“The worst thing you can do is tie yourself to the income tax,” he said, adding that the great recession demonstrated this. “Income tax got decimated.”
Schultz and the governor are not taking a unique position. A lot of states right now see themselves as fierce competitors for business and people. Washington may be drowning in red ink, but a lot of states are enjoying post-pandemic surpluses. A CBS News story last year said 27 states were considering either cutting taxes or eliminating them altogether.
The report quoted the Institute on Taxation and Economic Policy as saying many states now have “tax cut fever.”
And no one is looking for a vaccine.
If I may interject a reality check, here, Utah’s recent record seems to illustrate that, while tax rates are indeed important, they aren’t the sole reason states are attractive. Utah has Nevada to the south and Wyoming to the north, and both have no state income tax. And yet Utah, not the other two, led the nation in population growth during the last decade.
Also, there are downsides to all this talk that few seem to be addressing. The sales tax is regressive. In other words, poor people end up paying a larger share of their income for it than do wealthy people.
A report for the National Conference of State Legislatures said low-income people tend to spend about 75% of their earnings on things subject to sales taxes, while wealthy people spend about 17% of theirs on similar things.
Also, about 70% of all items purchased these days are services, which are not subject to sales taxes in Utah. Lawmakers tried to change that few years ago with little success.
And perhaps the biggest factor for Utah lawmakers this year is that the state no longer has a surplus. Revenues are flat.
The governor did not propose a tax cut in his budget. The House is proposing only a modest $160 million income tax cut.
And then there is this comment about politicians, from Richard Auxier, senior policy analyst at the Tax Policy Center, to CBS News: “Times are good now, but if there's a downturn, what will their response be?"
I can’t answer that, but I imagine what a lot of Utahns would say. If the state no longer had an income tax, at least it couldn’t raise it.
Forget about the penny-ante cuts lawmakers make to the flat-tax rate every year (last year it went from 4.85% to 4.65%, which returned about $400 million to taxpayers). “I would rather get rid of the income tax altogether,” he said.
As the saying goes, if you want less of something, tax it, and if you want more of something, tax it less. The income tax puts a price on productivity, or the fruits of workers’ labors. The less of that we tax, the more productive labor would become. Businesses would expand or relocate here. The population would grow and people would have more disposable income to pay for things that fill the state’s sales tax coffers.
Unless, that is, the state had to raise the sales tax so high to make up the difference that people stopped buying things.
Or if property taxes got so high that people couldn’t afford homes. Rents would rise and old folks on fixed incomes would be forced to leave. Surveys show people hate property taxes above all.
Pick your poison. It’s expensive to run a state, and the money has to come from somewhere. But most Republican lawmakers I’ve known through the years believe the state benefits most by lowering the cost of productivity, which makes it easier for people to spend more.
Utah’s new House speaker, Mike Schultz, recently told the Deseret News/KSL editorial board that the income tax is the most volatile of the three taxes.
“The worst thing you can do is tie yourself to the income tax,” he said, adding that the great recession demonstrated this. “Income tax got decimated.”
Schultz and the governor are not taking a unique position. A lot of states right now see themselves as fierce competitors for business and people. Washington may be drowning in red ink, but a lot of states are enjoying post-pandemic surpluses. A CBS News story last year said 27 states were considering either cutting taxes or eliminating them altogether.
The report quoted the Institute on Taxation and Economic Policy as saying many states now have “tax cut fever.”
And no one is looking for a vaccine.
If I may interject a reality check, here, Utah’s recent record seems to illustrate that, while tax rates are indeed important, they aren’t the sole reason states are attractive. Utah has Nevada to the south and Wyoming to the north, and both have no state income tax. And yet Utah, not the other two, led the nation in population growth during the last decade.
Also, there are downsides to all this talk that few seem to be addressing. The sales tax is regressive. In other words, poor people end up paying a larger share of their income for it than do wealthy people.
A report for the National Conference of State Legislatures said low-income people tend to spend about 75% of their earnings on things subject to sales taxes, while wealthy people spend about 17% of theirs on similar things.
Also, about 70% of all items purchased these days are services, which are not subject to sales taxes in Utah. Lawmakers tried to change that few years ago with little success.
And perhaps the biggest factor for Utah lawmakers this year is that the state no longer has a surplus. Revenues are flat.
The governor did not propose a tax cut in his budget. The House is proposing only a modest $160 million income tax cut.
And then there is this comment about politicians, from Richard Auxier, senior policy analyst at the Tax Policy Center, to CBS News: “Times are good now, but if there's a downturn, what will their response be?"
I can’t answer that, but I imagine what a lot of Utahns would say. If the state no longer had an income tax, at least it couldn’t raise it.
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