taxes

In Education, Small Amounts of Funding Can Go a Long Way

June 16, 2017  |  Posted in: Blog  |  No comments

As the media and public begin to focus more on taxpayer funding for government schools, one program with very little funding has had an enormous impact on the education those with special needs—an important demographic of children who can often be forgotten in government schools.

The Carson Smith Special Needs Scholarship was established in 2005 by action of the Utah Legislature and the signature of Governor Jon Huntsman. It provides private school scholarships to K-12 students who have a wide variety of special needs. With a current appropriation of only about $5 million, it serves over 900 children who can then get the specialized education that they need from the institution of their parents’ choice.

Bearing the name of the son of one of the program’s greatest advocates, Cheryl Smith, the program has steadily grown since its inception and is administered by the Utah State Office of Education. The success of the program has been well documented in legislative hearings and reports. Some important statistics include:

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Statement Opposing “Our Schools Now” Tax Increase

June 6, 2017  |  Posted in: Press Releases  |  One comment

Salt Lake City, UT (June 6, 2017) — Today, a group calling themselves “Our Schools Now” announced the filing of a ballot initiative that, if successful, would increase the income and sales tax rates of hard-working and already over-taxed Utahns.

In response, Libertas Institute’s Director of Policy Michael Melendez issued the following statement:

The corporate elite of Utah have finally decided how they want to reach into taxpayers’ pockets, and, instead of offering any real solutions, they remain committed to the same worn-out, disproven tax hike band-aid.

Additional funding to government schools must be tied to a real change in the philosophy of education in classrooms.

This income and sales tax hike will hit lower- and middle-class Utahns the hardest at a time when their tax burden has increased substantially in recent years, such as for gas, property, and purchases.

We need to have a real discussion in Utah about the priorities for the state’s $16 billion budget. Instead, this initiative will be a major distraction—and one that existing data suggests will not actually increase education outcomes, as its proponents claim.

Libertas Institute’s president, Connor Boyack, has separately written about how past increases in education funding have not led to better outcomes.

Should enough signatures be gathered to place this issue on the ballot, our organization intends to educate Utah voters as to why this harmful tax increase will not lead to the promises and claims made by its supporters.

Libertas Institute successfully obtains secret tax agreement between Tax Commission and Amazon

April 14, 2017  |  Posted in: Press Releases  |  No comments

Salt Lake City, UT (April 14, 2017) — In a hearing last month, the Utah State Records Committee unanimously agreed with our appeal seeking the release of the secret agreement between the Utah State Tax Commission and Amazon, following two denials by the Commission of our request.

The document was released today and can be accessed here.

Libertas Institute president Connor Boyack issued the following statement:

From the beginning of this effort we have contended that an agreement made by our government should be public to the Utahns that government serves. We are pleased to have successfully obtained and released this document for the public to review.

Organizations outside of Utah have similarly been seeking their state’s agreement without success. We hope that release of this document will encourage transparency among other state tax commissions.

While some have speculated that this agreement might contain something nefarious or “shady,” Libertas Institute’s only assertion has been that the document should be public as a matter of course. Upon review of the document, we find nothing problematic contained in what was released.

New Poll Shows Utahns Aren’t Sold on State Income Tax Increase for Public Education

February 6, 2017  |  Posted in: Blog  |  No comments

Earlier today, the Trafalgar Group (TFG) released a public opinion survey commissioned by Libertas Institute and Americans for Prosperity. The survey showed that only 50% of likely voters support the proposed state income tax increase when asked the same biased question being asked by polls commissioned by Our Schools Now. Here is the response to that question:

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TFG Senior Strategist Robert Cahaly was quoted in the press release, “Like most issues, public opinion reveals itself based on the presentation of the question. When presented with a single digit fraction the income tax seems insignificant, but when the true cost of the tax increase is revealed there is a major opinion shift.”

Instead when voters are informed of the monetary repercussions of such an action, support for the initiative deteriorates. This survey was conducted in such a way that likely voters were not pressured by live interviewers to write a blank check for public education. Even when voters were informed about Utah’s last place per student spending ranking, support hardly increased.

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Pollster Robert Cahaly also stated, “The question on cost per student affirms that in the abstract the public is willing to consider additional education support. This poll demonstrates that most Utahns share the current American consensus opinion on spending and taxes: ‘We want everything considered important to be well funded and we don’t want to pay more in taxes to make it happen.'”

Today’s new survey shows that majority support for a state income tax increase is not a foregone conclusion. Not only are voters against raising the state income tax, but they also have a negative opinion towards most of the other alternative tax increase proposals. We suggest that the legislature instead find a way to restore K-12 public education funding that has been earmarked for Higher Education. As we have written before, increasing funding for public education is not correlated to improved outcomes.

You can find the full poll report here.

Income Tax Increase Won’t Improve Education Outcomes

December 6, 2016  |  Posted in: Op-Eds  |  One comment

The following op-ed, written by our president Connor Boyack, was published this past weekend in the Salt Lake Tribune.

A group of business owners and former politicians have announced a plan to pursue a ballot initiative that—were it to pass—would increase each Utahn’s income tax rate. The proposal, pitched as a way to help children, is saturated in misleading messaging and is ultimately unnecessary.

“Our Schools Now” is a new label for a group of politically connected insiders, led by Zions Bank CEO Scott Anderson, a behind-the-scenes influencer in Utah politics. They recently announced their initiative proposal, telling the public that they are seeking only a “7/8 of 1 percent increase” to the personal income tax.

This is misleading because it lacks context—it makes it seem like a numerically insignificant amount. In reality, that seemingly tiny amount constitutes a 17.5% increase on each Utahn’s income tax burden.

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Why Utah Should Abandon the Work Requirement Waivers for Food Stamps

August 9, 2016  |  Posted in: Center for Individual Liberty  |  One comment

In his 2016 State of the State address, Governor Herbert has emphasized, “our state economy has added 219,000 new jobs, with an unemployment rate dropping from 8 percent down to 3½ percent today.” According to the U.S. Dept. of Labor, he’s right; Utah has the 15th lowest unemployment rate in the country. Why then did the state request a federal waiver for time limits on welfare requirements? Why are we still keeping some able-bodied working age adults dependent instead of helping them become self-reliant?

In 1996 Congress passed significant welfare reforms, ending the Aid to Families with Dependent Children (AFDC) and replacing it with Temporary Assistance for Needy Families (TANF). The rationale behind the change came from a study by the Cato institute in 1995. Cato found in some cases that someone on welfare could earn as much as twice the amount of a minimum wage job. While welfare has undergone many reforms, there is still room to improve and incentivize work instead of perpetuating a cycle of dependency—a trend that for too many has become intergenerational.

In its 2013 follow-up study, The Work vs. Welfare Trade-Off, Cato compared the poverty level with the amount of total welfare benefits available (up to 126 federal programs, not including local programs) and found that in 42 states, the value of welfare programs more than exceeded the poverty level as compared to wage earners—sometimes more than twice over (220% in Hawaii).

To put this into perspective, one of the highest paying states for welfare benefits in hourly wages is Hawaii at $29/hr; 13 states pay the the equivalent of over $15/hr. Moreover, welfare benefits are tax-free; thus, the dollar value of benefits is worth more than wages at a minimum wage job. While that differential may be offset with the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), the value and dignity of work and self-reliance cannot be understated. Those who work now, even if at a low wage, are building experience for future wage increases putting them in a better long-run position than those who do not work and subsist on welfare programs.

While there are certainly a variety of problems in assistance programs, including fraud, improper asset testing, and inaccurate income eligibility caps, the work requirements for ABAWDS (able-bodied adults without dependants) seem ripe for reform.

ABAWDS receiving food stamps have three months in a 36 month period where they don’t need to fulfill work requirements. After exceeding that time frame, they are required to work for 20 hours per week or participate in either a work or workfare program of the state. If they do not meet this requirement, they will no longer be eligible to receive food stamps.

This is the very reason welfare programs have work requirements—to give recipients time to work and build job skills while still receiving assistance in order to propel them into future self-reliance.

After the recession in 2008, the federal government established a state-by-state waiver for the work requirement time limits. States could seek the waiver and renew it each year. The waiver removes the time limit (three months) for which an ABAWDS can receive food stamps without utilizing any work programs. With the waiver, one no longer has to participate in these required work programs that are designed to assist individuals in becoming self-reliant or gaining job skills or experience in preparation for re-entering the workforce. This in turn places the recipient of food stamps at a long-term disadvantage as they may put off activities that would otherwise help them transition into the workforce.

Many welfare recipients report fear of job security at low wage jobs. Because many lack job skills to obtain high-paying jobs and therefore often work in entry-level positions, they are reluctant to leave the security of various assistance programs. However, this is the very reason welfare programs have work requirements—to give recipients time to work and build job skills while still receiving assistance in order to propel them into future self-reliance. Removing work requirements actually exacerbates the problem of recipients fearing lack of opportunity in the job market. Given this reality, it is understandable to see why many people remain on federal programs.

Deterring dependence on welfare and promoting self-reliance does not just matter to taxpayers—it matters to individuals, to families, and to entire communities.

The work requirements are not just in place to protect taxpayer dollars from freeloaders or those who would abuse the system—they exist because of the economic value of putting people to work, both individually and collectively. Deterring dependence on welfare and promoting self-reliance does not just matter to taxpayers—it matters to individuals, to families, and to entire communities. Work brings a sense of individual dignity and accomplishment. Work starts people on a ladder to future economic success. Work increases the economic pie of a community, and it creates very real social and economic capital for a family. Work is a valuable thing for society. Assistance programs were designed to assist individuals in times of hardship and then push them to find a job that pays enough to free them from a cycle of government dependence.

Many Utahns desperately need assistance. A few extra dollars for food every month can make a big difference for a family in need. However, insofar as these assistance programs are provided by government, policy makers must ensure that the inherent problems of bureaucracy do not inadvertently incentivize dependence. These workers need incentives to become self-reliant and they need the constructive support of work programs.

A study of Kansas, which reinstated work requirements in 2013, found a huge increase in re-employment. The study monitored the effects on individuals’ employment and earnings through an extensive tracking system. It found that the number of ABAWDS on food stamps dropped 75%, freeing 13,000 Kansans from welfare at the end of 2013. “Nearly 60% of those leaving food stamps found employment within 12 months,” notes the study, “and their income rose by an average of 127% per year.” This in turn increased economic activity, allowing the state to apply those resources to other state priorities. Kansas work participation has nearly tripled.

A study of Kansas, which reinstated work requirements in 2013, found a huge increase in re-employment.

On average, Kansas enrollees earn more than double the amount since work requirements were reinstated, and dependence on food stamps has been cut in half. Welfare reform in Kansas helped taxpayers save nearly $100 million over two years. The study’s conclusion is that the best anti-poverty tool is work.

Similarly, in 2011, Maine re-established work requirements and watched the ABAWDS caseload drop 80%, from over 13,000 recipients to under 2,700. As the Heritage Foundation noted, “Giving welfare to those who refuse to take steps to help themselves is unfair to taxpayers and fosters a harmful dependence among beneficiaries.”

Work is a sound principle of self-reliance and the greatest of anti-poverty tools.

Food stamp dependents across the country have tripled in the last 15 years, growing from 17 million in 2000 to 46 million in 2015. Spending on the food stamp program has grown ten times as fast as federal revenue—diverting resources from other priority programs. Studies show that implementing work requirements is the best way for food stamp dependents to move out of poverty.

Utah sought, received, and has renewed a partial waiver for the time limits on work requirements since 2009. This partial waiver allows the state to remove time limits for work in counties with “hardship” where unemployment rates exceed 10%. Our research indicates that 17 counties across Utah have met this criteria since 2009. In a letter to the U.S. Department of Health and Human Services in 2012, the state defended the waiver and the ability of states to receive it. The argument centered on the need for state flexibility and autonomy instead of federal executive micromanagement. While we agree that federal programs should be returned to the states, it is important that the programs we implement in Utah are based on sound principles. Work is a sound principle of self-reliance and the greatest of anti-poverty tools.

Utah sought, received, and has renewed a partial waiver for the time limits on work requirements since 2009.

Utah’s robust economy should provide ample opportunity for those in need in our state to find a job, even if it requires moving from a low population rural county to a place in the state with more opportunity. With an economy this great, Utah should not be incentivizing reliance on federal welfare programs. If Utah followed the examples of Kansas and Maine, it would likely further reduce unemployment while helping more Utahns to become self-reliant. Utah’s motto is industry. In the beehive state Utahns ought to be industrious, not dependent.

In 2012 Wyoming Governor Matthew Mead rejecting the waiver that Utah now has, stating that, “such a weakening waiver is not something Wyoming will neither seek nor accept… We must all continue to encourage a productive society, empowering Americans by promoting individual responsibility.”

Cato’s study concluded that, “If Congress and state legislatures are serious about reducing welfare dependence and rewarding work, they should consider strengthening welfare work requirements, removing exemptions, and narrowing the list of activities that qualify as ‘work.’ Moreover, states should consider ways to shrink the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.”

If our economy is so strong, why do we continue to implement a policy that abuses taxpayer dollars and deters economic growth? By implementing these sound principles, we will gain a more resilient workforce, lower unemployment rate, and better assistance programs that help move people from welfare to work. That is—or should be—the Utah way.

Taxing carried interest a bad idea for Utah’s Silicon Slopes

June 17, 2016  |  Posted in: Op-Eds  |  No comments

The following op-ed, co-authored by our policy analyst Josh Daniels, was published this week in the Deseret News.

The only things certain in life are death and taxes. Rarely, however, do you find a tax plan bad enough to guarantee them both. Such is the nature of the proposed scheme to double taxes on capital investment through the deceptive cry to close the so-called “carried interest loophole.” This proposal could kill growth on Utah’s “Silicon Slopes” — a growing nexus of tech ventures along the Wasatch Front.

Under current tax law, investment fund managers pay ordinary income taxes on management fees and capital gains taxes on carried interest — a type of gain on the value growth of the investment. Tax policies that treat investment gains differently than income are designed to incentivize savings and investment — critical factors in the equation for economic growth.

Lobbyists for this enormous tax hike call those who disagree “ideologues” and “zealots” with “dogmatic views” and insist that we need to double these taxes in the name of “equality” and “fairness” and to reduce the deficit. However, not only would this policy not make a significant dent in the deficit, it would reduce capital investment while causing pension funds, university investment funds and charitable funds to take a hit.

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Utah’s Tax Freedom Day — How long do you have to work for the government?

April 8, 2016  |  Posted in: Center for Private Property  |  No comments

Tax Freedom Day is the day when individuals in the entire nation, or state, have earned enough money to pay the total tax bill for the year. It includes all federal, state, and local taxes and divides them by the total income of all individuals.

Last year, Americans were forced to pay $3.28 trillion in federal taxes, and $1.57 trillion in state and local taxes. Here in Utah, Tax Freedom Day arrives on April 20th:

This year’s report by the Tax Foundation reveals an astonishing statistic: Americans collectively spend more on taxes than they do on food, clothing, and housing combined.

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Per Pupil Spending in Utah: The Wrong Measure of Success

June 4, 2015  |  Posted in: Blog  |  11 comments

Each summer, local media outlets produce stories about the level of per pupil spending in Utah, pointing out that Utah comes in last place across the country in per-pupil funding. These stories aren’t really news since Utah has been this way for years; perhaps the statistics are meant to scare Utahns into demanding that legislators allocate more of the taxation pie to the government education bureaucracy. If only it were that simple.

Utah is subject to some unique factors that yield relatively lower levels of available funds for education as compared to other states. Most notable are the larger families with more children. Other issues include the level of federal land ownership and lower income levels per pupil from which to draw. While the public education lobby, like any government bureaucracy, is diligent in advocating for its own growth, the issues underlying school finance in Utah are not remedied by simply throwing more tax dollars at them.

Few headlines about education spending point out the state’s efficiency when you compare academic achievement per dollar spent. This blind focus on total dollars as a supposedly important metric ignores the most central issue for government schools: are the children learning?

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Medicaid Expansion Not Healthy for Utah

March 24, 2015  |  Posted in: Blog  |  4 comments

Many expect the Governor to call a special session this year to re-consider a proposal for Medicaid expansion under the Affordable Care Act. We caution the Governor and Legislature against Medicaid expansion. Providing health insurance is not the responsibility of the government and such redistributive policies violate the property rights of everyone as it requires either raising taxes or incurring debt to finance such expenditures.

During the legislative session earlier this year we issued a warning in our public comment on the Governor’s “Healthy Utah” Medicaid expansion plan. Our view was that expanding Medicaid on the promise of generous federal matching funds was unwise because such promises were unlikely to be kept. We were proven right last week when Congressman Tom Price, Chairman of the House Budget Committee, unveiled the House budget plan which aims to balance federal spending in nine years. A key element of the budget plan is repealing Medicaid expansion under the Affordable Care Act, thereby eliminating these generous federal match rates altogether.

Representative Price replaced Paul Ryan as committee chairman this year and has advocated for cutting the federal match rate for Medicaid expansion in order to balance the budget since at least 2013. Such cuts would eliminate the promised 90 to 100 percent match for expansion while leaving the current rates for traditional Medicaid in place. The current federal match rate for Medicaid in Utah is 70 percent.

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