Utah's taxing capacity is 19 percent below the national average, but its taxing effort is 9 percent higher than the average for the nation, according to a recent Utah Foundation report.
The facts were released by the private tax research organization in a study that measures how Utah compares with other states in its ability to raise revenue to support state and local spending programs.The study indicates that Utah's low taxing capacity (bility to raise revenue from commonly used tax bases) places the state at a considerable disadvantage in attempting to provide state and local services for its citizens.
The problem, the foundation said, is compounded by the fact that Utah has a higher proportion of its population enrolled in public schools than any other state in the nation. In other words, the demand for governmental services in Utah is high - but its taxing capacity is low.
Because of this problem, the state has been forced to make a greater-than- average taxing effort. Utah had the highest tax effort among the eight Mountain States and the ninth highest tax effort in the United States, the foundation reported.
What are the major sources of state and local revenue in Utah and the United States?
Foundation analysts list three: sales tax, income tax, and property tax.
The tax effort for the sales tax in Utah was 49 percent greater than the U.S. average, and the tax effort for the income tax was 35 percent higher than the national average. Utah's relative use of the property tax, on the other hand, was about 4 percent less than the U.S. average.
Utah, the foundation said, tends to be high in its use of the sales tax and the individual income tax but average or slightly below average in its use of the property tax.
The foundation said the tax comparisons are based on a system that measures how much revenue a state could raise if it employed tax rates that were equal to national averages. This provides a more accurate guide of fiscal capacity than either population or personal income "which often can be misleading because taxes sometimes can be shifted to individuals and organizations residing outside of the state," analysts stated.
The comparisons, however, do not reflect the effect that the major tax increase by the 1987 Legislature may have had on taxing effort in Utah. At that time, Utah boosted the sales tax, the individual income tax, the motor-fuel tax and the cigarette tax.
Thus, the foundation reported, the relative tax effort today may be somewhat greater than that indicated by the study.