Utah Foundation study provides background on tax debate

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Governor Gary Herbert’s recent proposal for tax modernization grows out of long-standing concern over the role of sales tax in funding state government.

Some of those concerns are documented in a 2018 study from Utah Foundation, The Everyday Tax: Sales Taxation in Utah.

Among the key findings of the study:

  • During the past 45 years, Utah has seen the nation’s second biggest decline in taxable sales as a proportion of consumer expenditures.
  • Beginning in 1975, Utah’s sales tax imposed a larger tax burden than income or property taxes. During the past two decades it has trended downward to impose the smallest burden of the three.
  • Utah had essentially the same real per capita sales tax revenue in 1978 as in 2016 – meaning that, as costs climb, the state is losing purchasing power from this revenue source.
  • More than 20% of the state’s sales tax revenues are earmarked – meaning the expenditures lack standard annual legislative oversight, and the government’s flexibility to meet changing needs is constrained.
  • Among the nine western continental states that collect sales taxes, Utah has the lowest sales tax burden. If Utah broadened the sales tax base to include all personal consumption transactions, the state could drop the effective rate to 2.1% (from 6.2% currently) and generate the same amount of revenue.
  • Sales taxes on services are supported by economists and policy analysts across the ideological spectrum. However, expanding sales taxes to capture services can face intense pushback from industries to be affected and from citizens who fear the change will result in net tax increases.

You can find The Everyday Tax here: www.utahfoundation.org/reports/the-everyday-tax-sales-taxation-in-utah/