Tax Day is a good time to reflect on tax reform to come
The following op-ed was published today in the Deseret News.
Today is Tax Day — the deadline for filing your taxes — so we should use the opportunity to reflect on the situation and consider future reforms (and increases) that will hit your pocketbook.
Let’s start with education. At a time when many Utahns want to see more funding for public schools, recent federal tax reforms are causing families with children to pay more state income taxes.
This begs the question, who should be paying for public schooling? Should everyone be compelled to contribute because education benefits all of society? Should the rich pay a greater percentage then they already do? Or should those that are using the government’s service pay for it?
This is only one of the critical tax topics that Utahns need to consider.
Right now, the state dips into the general fund to subsidize transportation. On November’s ballot, you’ll be asked if you want to increase the gas tax by 10 cents per gallon. This extra revenue would help offset some of the transportation earmarks, but relying on the gas tax is a problem for the long term as the market moves toward alternative fuels. Less gas purchased means less revenue for government coffers.
A different solution is needed to stabilize transportation funding as it becomes clear that mass transit is an outdated approach to solving congestion. Ride-sharing, driverless vehicles and other future innovations from the marketplace also need to be seriously considered.
Another critical issue appears to be paradoxical. Businesses simply pass on increased costs from taxes and regulations to their consumers via increased prices. This is part of the reason the federal corporate income tax was lowered and why the Utah Legislature has pursued a variety of policies to ease the burden of state corporate income taxes on Utah businesses.
These types of policies may seem to signal less revenue for government, but they result in increased wages and salaries while producing lower prices for consumers. This creates a business-friendly environment that inevitably increases tax revenue over the long run.
Pursuing these types of broad-based policies is also much more fair, rather than providing tax exemptions, grants and other incentives to select, politically connected businesses.
Decreasing the state individual and corporate income tax rate is a start, but that rate needs to be closer to 4 percent than 5 percent to move Utah away from the middle of the pack in relation to other states. Staying competitive requires a tax rate reduction.
And while large businesses and many individuals will soon see some tax cuts, small businesses have been left out of the discussion. The Legislature failed to pass a proposal earlier this year to provide relief from the annual business supply tax that requires owners to count up and calculate taxes each year on all sorts of tangible property they own. This must be a priority next year.
Other important discussions need to be had about sales taxes. As the economy continues to be more service-oriented rather than goods-oriented, the claimed need to increase sales tax rates will continue to be at issue. Whether Utah should broaden the sales tax base by taxing services — and online sales as well — will continue to be debated. A broad and fair reform should allow Utah to lower its overall sales tax rate.
All these issues that must be dealt with in the near future show that major tax reform is just in its beginning stages. Tax Day discussions like the ones of late will continue to be the norm.
While today is Tax Day, April 11 was Utah’s Tax Freedom Day — the day when Utahns collectively earned enough money to pay their total tax bill (federal, state and local) for 2018. Some states like New York have such high taxes that they won’t have their Tax Freedom Day until May 14. You can learn more by visiting TaxFreedomDay.org.
As you submit this year’s tax returns and as you consider candidates for political office this year, remember that they will be dealing with weighty tax policies over the next few years. Make sure they represent the principles that are important to you, because big changes are likely to soon come.