Make tax reform sensible
Clearly this is high tide in the state's economic cycle. Revenues are streaming into state coffers. Lawmakers this year are expecting $1 billion in one-time surpluses and ongoing collections. When money is flowing through the door, there is little incentive to change anything about the way it gets there. Clearly, that was borne out a decade ago, when huge surpluses in Utah led to little more than minor tax cuts.
But this year seems different. From legislative leaders on down, a real momentum is building, not just for tax cuts but for reform. That's an encouraging sign of leadership. It's also a sign that a lot of lawmakers understand that tax reforms are easier to enact when money is available than when times are hard and the weaknesses of the current tax system are glaringly obvious.
About two dozen reform bills are pending as the new session begins next week. Many of the ideas they espouse are worthwhile. The danger, however, is that lawmakers will spend the session negotiating cuts and reforms that sound good, without any real thought to a comprehensive plan that is best for the state's future.
The beauty of the plan former Gov. Olene Walker presented before leaving office was that it was designed to keep the most important pieces of Utah government moving forward in good times and bad, and that it was based on overriding philosophies about taxation and fairness.
State lawmakers and the current governor have backed away from a true flat-tax plan. They likely will allow deductions for charitable contributions, mortgages and some other things. But they seem to want to lower the overall income-tax rate, which would be a break for most Utahns. Many of them seem committed to completely removing the sales tax from nonprepared food items, which would be a decision steeped in philosophy about fairness.
But the most important parts of these plans lie in how they would compensate for the revenue lost. That's where philosophy may run afoul of easy fixes.
For example, some proposals would impose a single sales-tax rate for the entire state, something that would make it easier to tax Internet and catalog sales. But in doing so, these plans would harm entities and programs for which voters already have approved special sales-tax levies.
At least one plan would keep those special taxes in place until they expire, then require any renewals to come out of property taxes, rather than sales taxes. This makes little sense when, for example, the issue concerns transit taxes. Many tourists and other visitors use TRAX and buses to get around town. These people don't pay local property taxes, but they do contribute to sales taxes. The shift of this levy to property taxes, then, would have no philosophical underpinnings. It lacks long-term vision about how to fund important local needs.
The lesson in all this is that, regardless of how much money is available, tax reform is not an easy task. Utah's lawmakers deserve a lot of credit for their determination to make it happen in times of plenty. Doing it right, however, will require a lot of work and a lot of good leadership.
Comments
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