Auto and truck sales provide an enormous amount of tax revenue for state and local governments in Utah. Without sales tax from vehicle sales, many government budgets would be in trouble.
So what’s going to happen a decade or so from now when mobility becomes a service? A lot of smart people are predicting that most people will not own cars, but instead will simply order a vehicle to show up when they need one. It will be part of the “sharing economy,” with all sorts of products, goods and services available without ownership – and without paying sales tax.
In the coming sharing economy, where people buy and own fewer things and instead use them as needed, on a service contract, the sales tax base could collapse. The economy is evolving from retail to services. The tax structure needs to follow.
That’s why the governor and Legislature need to engage in serious tax reform to broaden the sales tax base and lower the rate, granting a modest overall tax cut.
And why not do something really bold? Why not create the most modern, stable tax system in the country? Speaker Brad Wilson has said that taxing every service would allow lowering the state sales tax rate from the current 4.7 percent to 2 percent. Two percent would be a really low rate. So tax all sales and all services, at an equal 2 percent. Treat every business the same – 2 percent. Who could argue with that?
Local governments would need to lower their sales tax rates commensurately or it would be a big windfall for them.
It would position Utah for the economy of the future.