Nationally, the trend is clear. States that tend to vote Republican have less of a tax burden than states that vote Democratic.
Except, that is, for a small handful of red states, and Utah is one of them.
Utah, according to a new study, has the 15th highest tax burden in the nation. It’s got the third highest among Republican-leaning states, right behind Iowa (13th) and Kansas (14th).
This is not a top-20 list you want to be a part of.
Now that I have your attention, a bit of perspective is in order.
Except, that is, for a small handful of red states, and Utah is one of them.
Utah, according to a new study, has the 15th highest tax burden in the nation. It’s got the third highest among Republican-leaning states, right behind Iowa (13th) and Kansas (14th).
This is not a top-20 list you want to be a part of.
Now that I have your attention, a bit of perspective is in order.
One of the truisms you glean from decades in this business is that studies flow constantly, like a broken faucet. Another is that methodology matters. That old Mark Twain quote about lies (darned) lies and statistics comes to mind. What you decide to measure affects the results.
Occasionally, however, a few interesting studies bunched together can raise some interesting questions.
So, when the personal finance website WalletHub decided to publish a ranking of states based on tax burden and one based on stress levels in the same week, it caught my attention.
Somehow, Utahns are among the highest taxed people in America, and yet they rank dead last according to stress. I always thought paying taxes was the definition of stress.
But, on the surface, at least, we’re forking out money to governments, and we’re perfectly chill about that.
Except that, if you live in an average suburban Utah neighborhood, like I do, this doesn’t describe basic back-fence chatter. Although, I will admit most of my neighbors will smile at you while complaining about taxes.
So, let’s look at the details.
Wallethub’s study of taxes is unique in that it attempts to measure tax burdens, not just tax rates. This means, according to the organization’s website, that it “measures the proportion of total personal income that residents pay toward state and local taxes.”
By this measure, Utah’s flat income tax rate is the nation’s ninth most burdensome. A spokesperson for Wallethub told me the figures were based on the state’s old 4.95% income tax rate, not the 4.85% one that just passed the Legislature. That tenth of a percent may make a slight difference.
However, a flat tax is naturally more regressive than one that is indexed to income. The very poor don’t have to pay income tax in Utah, but the rest of us pay more as a percentage of personal income the less we earn.
The state did much better in terms of property taxes, ranking 37th (with first being worst). But then, Utah has a law that prohibits local governments from collecting more in overall property taxes from year to year based on inflation or other factors, unless they want to declare a tax hike and hold public hearings. A study by the Utah Foundation last year found that this law has worked well.
Also, the state ranks 19th in terms of sales and excise taxes.
As for the chill factor, well, Wallethub examined such things as average hours worked per week. Apparently, Utahns come in dead last in that category. Maybe we would pay less in taxes as a percentage of earnings if we worked harder.
The real answer to these two seemingly contradictory outcomes may lie in a completely different set of numbers. According to the Census Bureau, Utah has the smallest wealth gap in the United States, which means the state has less income inequality than anywhere else. Large families and a young population help with this, experts say.
A smaller wage gap means less stress trying to get ahead. And those large families lead to higher taxes for public schools.
Or at least that’s one explanation.
Studies are only as valuable as policy makers believe they are. But they should be measured against reality. In spite of how the state ranks on any list of metrics, Utah was the fastest growing state in the last decade and its economy has produced an unemployment rate of 2.1%.
People keep moving here. As University of Tennessee economics professor Donald Bruce told Wallethub, what matters most for economic development is how taxes are spent. Businesses care about things like schools, roads, highways and other infrastructure, too — not just tax rates. They also care about housing costs, air quality and a persistent drought. It’s complicated.
Still, it’s never bad for politicians to understand that, despite how chill we are, it wouldn’t hurt to pay taxes a little more like most of those other red states.
Occasionally, however, a few interesting studies bunched together can raise some interesting questions.
So, when the personal finance website WalletHub decided to publish a ranking of states based on tax burden and one based on stress levels in the same week, it caught my attention.
Somehow, Utahns are among the highest taxed people in America, and yet they rank dead last according to stress. I always thought paying taxes was the definition of stress.
But, on the surface, at least, we’re forking out money to governments, and we’re perfectly chill about that.
Except that, if you live in an average suburban Utah neighborhood, like I do, this doesn’t describe basic back-fence chatter. Although, I will admit most of my neighbors will smile at you while complaining about taxes.
So, let’s look at the details.
Wallethub’s study of taxes is unique in that it attempts to measure tax burdens, not just tax rates. This means, according to the organization’s website, that it “measures the proportion of total personal income that residents pay toward state and local taxes.”
By this measure, Utah’s flat income tax rate is the nation’s ninth most burdensome. A spokesperson for Wallethub told me the figures were based on the state’s old 4.95% income tax rate, not the 4.85% one that just passed the Legislature. That tenth of a percent may make a slight difference.
However, a flat tax is naturally more regressive than one that is indexed to income. The very poor don’t have to pay income tax in Utah, but the rest of us pay more as a percentage of personal income the less we earn.
The state did much better in terms of property taxes, ranking 37th (with first being worst). But then, Utah has a law that prohibits local governments from collecting more in overall property taxes from year to year based on inflation or other factors, unless they want to declare a tax hike and hold public hearings. A study by the Utah Foundation last year found that this law has worked well.
Also, the state ranks 19th in terms of sales and excise taxes.
As for the chill factor, well, Wallethub examined such things as average hours worked per week. Apparently, Utahns come in dead last in that category. Maybe we would pay less in taxes as a percentage of earnings if we worked harder.
The real answer to these two seemingly contradictory outcomes may lie in a completely different set of numbers. According to the Census Bureau, Utah has the smallest wealth gap in the United States, which means the state has less income inequality than anywhere else. Large families and a young population help with this, experts say.
A smaller wage gap means less stress trying to get ahead. And those large families lead to higher taxes for public schools.
Or at least that’s one explanation.
Studies are only as valuable as policy makers believe they are. But they should be measured against reality. In spite of how the state ranks on any list of metrics, Utah was the fastest growing state in the last decade and its economy has produced an unemployment rate of 2.1%.
People keep moving here. As University of Tennessee economics professor Donald Bruce told Wallethub, what matters most for economic development is how taxes are spent. Businesses care about things like schools, roads, highways and other infrastructure, too — not just tax rates. They also care about housing costs, air quality and a persistent drought. It’s complicated.
Still, it’s never bad for politicians to understand that, despite how chill we are, it wouldn’t hurt to pay taxes a little more like most of those other red states.
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