We’ve all heard the phrase, “Don’t waste a good crisis.” It’s an expression commonly applied to government because, absent a crisis, it's usually very difficult for government, especially at the federal level, to address challenging issues and make consequential decisions.
It is the almost-universal nature of government to postpone thorny problems until a major crisis forces action.
But something remarkable is happening right now on Utah’s Capitol Hill. Our governor and state legislators are committed to addressing a looming problem — a serious imbalance in the state’s tax system — before it grows into a major crisis.
I congratulate the governor, legislators and their leaders, and all the stakeholder groups for being willing to tackle this critical, complex issue before the imbalance causes significant damage to the services of state government.
With only two weeks to go in the session, lawmakers are deep into the complicated details of tax reform. Initiatives such as this one are always far more difficult, and take longer, than expected.
I encourage our lawmakers to stay focused and get the job done. This would be a generational accomplishment, a legacy achievement that will benefit our children and grandchildren.
Utah could emerge with the most balanced tax system in the country, positioning the state for future growth and prosperity — and the ability to cope with inevitable economic downturns.
And this is the right time to do it. The healthy budget surplus the state enjoys helps lubricate tax reform. It enables an overall tax cut for all taxpayers even as the sales tax base is broadened and tax rates are reduced. If we wait for a crisis, we will face budget shortfalls and rebalancing the tax system will be much more difficult.
A sales tax that does not keep up with population or economic growth threatens funding for virtually all state services, and eventually for education. Air quality, Medicaid, law enforcement, child welfare services, prisons, and so forth, could all face funding shortfalls if the sales tax base is not broadened.
Again, it’s important to remember that broadening the base will not increase taxes. In fact, the governor and Legislature are committed to lowering the sales tax rate.
But some services that currently are not taxed, will be taxed, (including some in my own financial services industry), at the lower rate.
Reforming the sales tax will be incredibly complicated. According to the Federation of Tax Administrators, as reported by the Gardner Policy Institute, some 248 different services exist in nine categories.10 comments on this story
That’s a lot of services. Some of them may simply be impractical to tax, costing more to collect the tax than revenue received. And the interests on local taxing entities, which rely heavily on the sales tax, will need to be taken into account.
Each service industry and category employs many advocates and lobbyists, some of them saying, “Don’t tax you, don’t tax me, tax that man behind the tree.”
Tough choices must be made. In the process, I hope the education fund will be protected. Rebalancing the state’s sales tax system can be done without impacting the income tax, which funds education.