Summer is almost gone, and Utah lawmakers have yet to come up with a winning bumper sticker argument for why major tax reform is needed, and especially why the state should begin charging sales taxes for some services.
This could prove problematic as cool weather approaches and a tax reform task force struggles to come up with something that could become law.
This could prove problematic as cool weather approaches and a tax reform task force struggles to come up with something that could become law.
First, we were told it wasn’t right to let barbers and hair stylists avoid charging sales tax. Then we were told many people no longer mow their own lawns. Instead, they hire people to do it for them. This means they no longer buy retail lawn mowers, meaning they also don’t pay sales taxes, because lawn mowing services are exempt.
Ergo, sales tax revenues aren’t growing as they should.
But both examples are about jobs primarily held by low- to moderate-income people. As any conservative lawmaker will tell you, the more you tax something, the less of that thing you will get. That means taxing services will mean less business for hairdressers and lawn care companies, or less money for people already struggling to make a living.
Now we have the music example, which is part of a video state leaders showed at several recent public hearings. People today purchase online music streaming services, rather than buying records or CDs, with their attendant sales taxes.
This, too, is a troubling argument. The state may be able to negotiate with Amazon, for instance, to charge sales taxes whenever someone renews a yearly subscription for music, but it won’t be able to tax each individual song that person streams or downloads, the way it once taxed every LP, single or CD purchase. Those things are given to subscribers at no extra charge.
The lesson there is that some sales tax revenue is lost forever, beyond the reach of any tax collector.
Added to these bumper-sticker problems is the fact that the state keeps running surpluses. Last week, a preliminary report showed a $97 million surplus. Legislative leaders were quick to paint this as an argument for tax reform, because income tax collections are growing faster than sales tax collections. They even warned of a $43 million deficit in the sales tax, but this is only because growth was less than the 5.3% that had been projected. Revenue still grew by 3.6%.
An old adage says it’s easier to enact sweeping tax changes during good times than bad. But Utah’s current experience demonstrates that tax reform is no picnic during good times, either.
That doesn’t mean it isn’t worthwhile to pursue.
A paper released at a municipal finance conference last year, titled, “The retail sales tax in a new economy,” makes a great argument for why the tax is a good one. Simply put, the sales tax lets every person decide how much to pay, even if this is done subconsciously.
“Whatever the individual feels he or she can afford to purchase from the private sector is a good measure of what the individual can afford to contribute to the provision of public services,” the paper said.
The problem, of course, is how to turn this sound philosophical reckoning into an effective tax in a changing economy, and to do it without enraging the public.
Developments this summer have not all been bad. Sure, the public hearings were dominated by special interests that stand to gain or lose through various tax reform proposals, but a recent poll commissioned by the Salt Lake Chamber found 49 percent of Utahns supporting, in a general sense, efforts to broaden the sales tax base by taxing some services.
That’s still not a majority, and the numbers might quickly change as people begin paying taxes for things that previously were exempt, but it does signal a level of public awareness.
Also, lawmakers have begun talking about the need to change how taxes are allocated — perhaps opening up income tax to something other than just education. Others are talking about making changes gradually, and coupling them with an income tax cut.
Still, like most things, tax reform might seem tantalizingly easy on a lazy summer day. There will be no pain free way to either shore up the sales tax or reallocate the income tax, and it will be even harder without a quick and convincing bumper sticker explanation as to why it’s needed.
Ergo, sales tax revenues aren’t growing as they should.
But both examples are about jobs primarily held by low- to moderate-income people. As any conservative lawmaker will tell you, the more you tax something, the less of that thing you will get. That means taxing services will mean less business for hairdressers and lawn care companies, or less money for people already struggling to make a living.
Now we have the music example, which is part of a video state leaders showed at several recent public hearings. People today purchase online music streaming services, rather than buying records or CDs, with their attendant sales taxes.
This, too, is a troubling argument. The state may be able to negotiate with Amazon, for instance, to charge sales taxes whenever someone renews a yearly subscription for music, but it won’t be able to tax each individual song that person streams or downloads, the way it once taxed every LP, single or CD purchase. Those things are given to subscribers at no extra charge.
The lesson there is that some sales tax revenue is lost forever, beyond the reach of any tax collector.
Added to these bumper-sticker problems is the fact that the state keeps running surpluses. Last week, a preliminary report showed a $97 million surplus. Legislative leaders were quick to paint this as an argument for tax reform, because income tax collections are growing faster than sales tax collections. They even warned of a $43 million deficit in the sales tax, but this is only because growth was less than the 5.3% that had been projected. Revenue still grew by 3.6%.
An old adage says it’s easier to enact sweeping tax changes during good times than bad. But Utah’s current experience demonstrates that tax reform is no picnic during good times, either.
That doesn’t mean it isn’t worthwhile to pursue.
A paper released at a municipal finance conference last year, titled, “The retail sales tax in a new economy,” makes a great argument for why the tax is a good one. Simply put, the sales tax lets every person decide how much to pay, even if this is done subconsciously.
“Whatever the individual feels he or she can afford to purchase from the private sector is a good measure of what the individual can afford to contribute to the provision of public services,” the paper said.
The problem, of course, is how to turn this sound philosophical reckoning into an effective tax in a changing economy, and to do it without enraging the public.
Developments this summer have not all been bad. Sure, the public hearings were dominated by special interests that stand to gain or lose through various tax reform proposals, but a recent poll commissioned by the Salt Lake Chamber found 49 percent of Utahns supporting, in a general sense, efforts to broaden the sales tax base by taxing some services.
That’s still not a majority, and the numbers might quickly change as people begin paying taxes for things that previously were exempt, but it does signal a level of public awareness.
Also, lawmakers have begun talking about the need to change how taxes are allocated — perhaps opening up income tax to something other than just education. Others are talking about making changes gradually, and coupling them with an income tax cut.
Still, like most things, tax reform might seem tantalizingly easy on a lazy summer day. There will be no pain free way to either shore up the sales tax or reallocate the income tax, and it will be even harder without a quick and convincing bumper sticker explanation as to why it’s needed.
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