Utah's poor residents pay state taxes at a rate 67 percent higher than the most wealthy Utahns.
And Utah's middle class is overtaxed too - paying at a rate 33 percent higher than the richest residents, according to a study of all 50 states released Monday by Citizens for Tax Justice - a coalition of labor and watchdog groups."By letting the rich off easy, Utah has put too much of the tax burden on those who can least afford to pay," said coalition director Robert S. McIntyre.
"The problem is over-reliance on regressive sales and excise taxes rather than on a progressive, pay-by-ability income tax."
For example, McIntyre said that Utah sales tax and excise taxes - on such things as gasoline, cigarettes and liquor - take 5.7 times as great a share of income from the poorest fifth of Utah families as from the richest 1 percent.
Such taxes also take 3.3 times as much from middle-income families as from the rich, the study said. It noted that in the past six years, Utah state government's share of sales tax increased from 4.625 percent to 5.0 percent; its gasoline tax from 14 to 19.5 cents a gallon; and its cigarette tax from 12 to 24.8 cents a pack.
Adding to overall tax inequity in Utah is that it allows deduction of federal income taxes from state income taxes, which helps the richest Utahns more than the middle class - and offers no or little relief to the poorest families, the study said.
The overall result is that the poorest fifth of Utah families (earning an average $13,400) pays 13.7 percent of their income to state taxes. The middle fifth of Utah families (earning an average $37,100) pays 11.2 percent.
And the richest 1 percent of Utahns (making an average $594,100) pay only 8.2 percent, the study said.
"There's no reason the public should tolerate the level of unfairness in state and local taxes that our study documents," McIntyre said. "The public should demand that their governors and legislators take action to bring their tax systems in line with basic notions of fairness."
Gov. Norm Bangerter's chief of staff, Bud Scruggs, said the concerns are the same as those raised during the 1988 debate over an initiative to take the sales tax off food.
"Taking the sales tax off food was defeated despite the dislike of the tax," Scruggs said, because voters believed the revenue was needed and making it up through increases in income taxes could hurt economic development.
He said the tax on food purchases was a major reason for Utah's poor showing in the survey. "We're one of the few states that have sales tax on food. That is just a major factor."
The coalition specifically recommended that Utah:
- Eliminate the deduction for federal income taxes from the Utah personal income tax. The study says it "is an enormous windfall for the rich, since they pay a greater share of their incomes in federal income taxes than does anyone else."
- Avoid further increases in sales and excise taxes and shift to heavier reliance on the corporate and personal income taxes.
- Target property tax relief to those most in need.
While McIntyre said "no state can be proud of our findings about its tax system," the coalition blasted other states much more than Utah. Utah managed, for example, to escape the coalition's "terrible 10" list.
But the study also showed that all income groups in Utah pay more than most states for state taxes.
For example, the poorest fifth of families in 33 of the 50 states and the District of Columbia paid a lower percentage of their income for state taxes than the poorest fifth in Utah did.
And the middle fifth of families in 41 of the other states paid a lower rate than the middle class in Utah. And 33 states had lower rates for their most wealthy residents than did Utah.
Here is how interior Western states and their local governments compare in the taxation of poor, middle-income and high-income families of four.
State Low Mid Rich
Arizona 14.3 9.6 7.6
Colorado 11.0 9.3 6.4
Idaho 12.8 9.6 8.8
Montana 7.1 7.4 7.0
Nevada 10.0 5.7 1.8
New Mexico 13.1 9.4 8.6
Utah 13.7 11.2 8.2
Wyoming 9.0 5.3 2.4
United States 13.8 10.0 7.6
The "poor" column shows total state and local taxes as a percentage of income for the 20 percent of families with the lowest earnings, which average $12,700 nationwide. "Mid" is for those averaging $39,100. "Rich" covers the top 1 percent of incomes, averaging $875,200.
Source: Citizens for Tax Justice, Associated Press.