Tax and Budget

July 30, 2020

Tax and Budget

Every day, our state and federal governments raise and spend tax revenue in ways that profoundly affect families and children. Choices states make about investing in schools, health care, child care, and other services can either help create opportunity and prosperity for people or hold them back.

Voices for Utah Children works to fight poverty by examining Utah's tax and budget policies and analyzing their impact on children, particularly those from low- and moderate-income families that are most at risk for not completing their education or otherwise not achieving their full potential. We identify evidence-based fiscal strategies to strengthen struggling families, often by means that save taxpayers money in the long run.

Published in Legislative Center
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July 30, 2020

Family Economic Success

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February 27, 2020

Public Opinion Survey

Voices for Utah Children Public Opinion Survey

The Utah Legislature is deciding right now what to do with Utah's tax revenues for the fiscal year beginning July 1, 2020. The biggest question is: Should they cut taxes or invest in Utah’s future? Please read the main arguments on either side and click on the button below that you agree with the most….​

The Arguments for Cutting Taxes

The Arguments for Investing in Utah’s Future

1) Any state budget surplus belongs to the taxpayers, so it should be returned to us.

2) Lower income tax rates will make the state more competitive and help the economy grow faster.

3) Lower taxes on businesses will make the state more competitive and help the economy grow faster.

1) According to Utah Tax Commission data, Utah’s taxes are already the lowest they have been since the 1960s (adding up all state and local taxes as a percent of incomes).

2) Utah has fallen behind on investing in critical needs like education, infrastructure, and clean air.

3) If we make wise up-front investments in these areas today, we and especially our children will reap the gains tomorrow.

 VUC CUT TAXES graphic

 VUC INVEST graphic 

 

 

 

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February 28, 2020

Public Opinion Action Page

Survey results are clear: Utahns overwhelmingly prefer investing in our future over tax cuts: 

  DN tax poll web

But is the Legislature listening?

 

 

 

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BROAD COALITION CALLS FOR INVESTMENT IN UTAH’S FUTURE

“Taxes are low already – the economy is good – now is not the time for even more tax cuts”

Salt Lake City – On Thursday, February 20, 2020 on the steps of the Utah Capitol, a broad and diverse coalition of Utah advocates for the poor, for persons with disabilities, for education, health care, clean air, and for a variety of other popular Utah priorities held a press conference calling on the Utah Legislature to avoid cutting taxes until it has developed a comprehensive plan to address Utahns’ top concerns by investing in Utah’s future.

Participants in the press conference included (in alphabetical order):

  • Action Utah
  • American Academy of Pediatrics, Utah Chapter
  • Catholic Diocese of Salt Lake City
  • Center for Biological Diversity
  • Coalition of Religious Communities
  • Community Action Partnership of Utah
  • Crossroads Urban Center
  • HEAL Utah – Healthy Environment Alliance of Utah
  • Legislative Coalition for People with Disabilities
  • Sierra Club Utah Chapter
  • Utah Citizens Counsel
  • Utah Education Association
  • Utah Physicians for a Healthy Environment
  • Utahns Against Hunger
  • Voices for Utah Children

The effort was inspired in part by a column in the Deseret News by Zions Bank CEO Scott Anderson, who wrote,

I hope the theme of the session that starts next Monday will be, ‘Investing in Utah’s future.’ Nothing is more important than preparing for, and investing in, the rapid growth that is occurring in Utah…. Utah taxes are relatively low — lower now than in many years. Investments in education, clean air and infrastructure will produce good jobs and preserve Utah’s strong economy.

The advocates pointed out that, according to recent reports from the Utah State Tax Commission and the Utah Foundation, taxes in Utah are the lowest that they have been in decades, following repeated rounds of tax cutting. “We understand that tax cuts are popular, but we’ve reached the point where we have to ask: Is the current generation of Utahns doing our part, as earlier generations did, to set aside sufficient resources every year to invest in our children, in our future, in the foundations of tomorrow’s prosperity and quality of life?” said Matthew Weinstein of Voices for Utah Children.

The advocates laid out a positive vision of how all Utahns would benefit from enhanced investment in our state:  

Jean Hill, Catholic Diocese of Salt Lake City: “As an active participant in many of the efforts to end homelessness in Utah, the Diocese of Salt Lake City has seen first-hand the impacts of rapidly rising rents and dwindling stocks of affordable housing.  If we truly want to render episodes of homelessness brief, rare and non-recurring, we must invest in housing and supportive services for those on the brink or already experiencing homelessness.”

Jonny Vasic, Executive Director, Utah Physicians for a Healthy Environment: "Salt Lake County continues to be ranked in the top 10 as having the worse air pollution in the country, in both 24-hour particulate matter and in ozone. This leads to a long list of health issues and even premature death.  We cannot pass this problem off to the next generation. There are solutions, but it starts with awareness and needs the combined effort of the community with strong political will from our leaders.”

Bill Tibbitts, Crossroads Urban Center: “Utahns want our leaders to improve housing affordability and reduce the number of children and adults who spend time in shelters or sleeping in cars.  We not going to solve these big problems if we put off doing something about them until tomorrow.”

Dr. William Cosgrove, American Academy of Pediatrics, Utah Chapter: “The Utah Chapter of the American Academy of Pediatrics represents more than 700 Utah Pediatric providers. We are dedicated to the health, safety and wellbeing of all Utah children. Utah’s children comprise 30% of Utah’s population, but those children are 100% of Utah’s future. In order to achieve Utah’s best future, we must invest in the physical and emotional health of our children. We, as a community, are urging our leaders to provide each child access to:

  • clean air, clean water, and safe food
  • safe living arrangements
  • adequate time with loving and attentive parents
  • exposure to rich language and books as infants and toddlers
  • excellent early childhood care and education to ensure they are ready for kindergarten
  • teachers who are well-trained, adequately compensated, and have the resources they need
  • safe, violence-free, neighborhoods to play and learn in

A young family cannot, by themselves, provide these things to their children. They need citizens in their communities and tax resources collected by the government to be invested into critical services and resources for the benefit of children. Historically, Utah has under-funded pre-schools and K-12 schools which has slowed the development and education of a generation of children. There is no better investment opportunity, nor better return-on-investment, than fully funding the education of Utah’s children.”

Clint J. Cottam, MPA, Executive Director, Community Action Partnership of Utah: “Community Action Agencies in Utah recently asked thousands of individuals to identify barriers preventing households and communities from achieving their full potential. Every assessment, whether in predominantly urban or rural regions, cited housing as the investment most lacking throughout Utah. Stories were shared of Utahns becoming sick from mold, experiencing homelessness, forgoing basic needs like medicine and medical equipment, turning down employment, or extending their commutes due to housing quality, availability, and/or affordability.  Investments in increasing the quality, availability and affordability in the state will improve health outcomes and continue to keep Utah’s economy strong.”

Deeda Seed, Senior Utah Field Campaigner, Center for Biological Diversity: “This is not the time for tax cuts. The enormous growth we’re experiencing in Utah comes with many problems including the critical lack of affordable housing, polluted air, and the loss of open space.  Addressing these problems costs money, whether its building affordable housing, taking steps to clean up our air, or preserving open space. Our tax dollars should be used to support a sustainable healthy future for all Utahns and to address the impacts of growth.”

Utah Education Association President Heidi Matthews: “The growing Utah economy provides an ideal opportunity to make long-needed investments in the promise of a quality education for every Utah student. Rather than cutting taxes, we should be building futures.”

Cheryll May, Steering Committee Member, Utah Citizens Counsel: “The Utah Citizens Counsel maintains that every Utah child should have an equal opportunity for a healthy and productive life. Yet thousands of children from disadvantaged backgrounds enter kindergarten years behind their peers in basic knowledge and skills. High quality early-childhood education programs can greatly mitigate this deficit. Few Utah children currently have access to these programs. Extensive research shows that investments in such programs are cost effective. State programs supporting quality early education have been shown to save money in later years on remedial education, teen pregnancy, drug abuse, juvenile justice and corrections.”

Gina Cornia, Executive Director, Utahns Against Hunger: “Utah policy makers have always prided themselves on doing what is best for Utah families. Utahns Against Hunger urges them to embrace this perspective and reflect on how the important work they do during the session will impact the most vulnerable Utahns. Moving forward, we believe, that tax policy and budget plans should reflect a concern and a priority for those who too often go without or wait too long to for their situations to matter.”

Carrie Butler, Policy Director, Action Utah: “We at Action Utah believe that we are fortunate to live in a state rich with environmental and economic resources, and we support investment into the future for all Utahns. We encourage work on  policies that matter most to a majority of Utahns, including funding for programs that assist our most vulnerable populations, funding for education, mechanisms that help reduce cost and expand access to healthcare, and programs that improve our air quality. We encourage the legislature to carefully consider these issues and prioritize funding them in responsible ways.”   

Janet Wade, Legislative Coalition for People with Disabilities: “Individuals with disabilities and their families are often forgotten by policymakers when considering tax reform and budgets, but people with disabilities make up approximately 12% of the population of Utah and are an important part of the diversity in our state.  Individuals with disabilities and their families require ongoing services and supports to effectively participate in our communities, schools, and workplaces. The Legislative Coalition for People with Disabilities (LCPD) believes that legislators have an ethical obligation to protect and serve this vulnerable and overlooked population, and we strongly urge the Utah Legislature to develop a long-term funding strategy to support Utahans with disabilities and their families, including those currently on the “waiting list” for DSPD services.”

Taken together, the advocates’ message amounts to a vision of a healthier, wealthier, better educated and more prosperous Utah in the future – if our leaders can resist the election-year temptation to cut taxes and avoid the public revenues losses that leave us unable to make the critically needed investments today that will pay off many times over in the future.

Finally, the advocates expressed gratitude for the hard work and sacrifice of Utah legislators, who willingly give of their time and energies in service to the people of Utah, grappling with the most difficult policy choices and budget tradeoffs, often without public understanding or appreciation. The advocates called on all Utahns to consider the example of earlier generations that sacrificed so that we could have a better state today.

This press release is also available as a pdfdownloadable pdf here

This event was recorded and can be viewed at 

Media coverage links: 

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Utah Tax Incidence History 1995 - 2018

Utah is in the midst of the most intense debate over taxes that our state has seen in many years. In December the Legislature passed a major tax restructuring package following a year of public hearings and legislative deliberations. Days later, citizens from across the political spectrum filed a petition to roll back the new law. Media reports are that citizens around the state are collecting tens of thousands of signatures to bring the new law before the voters in a referendum this November.

In the midst of this very active and engaging public debate, which will likely continue whatever the outcome of the petition-gathering effort, it is worth asking how the legislation that was passed fits into the history of Utah's taxes over the last several decades. Have Utah's taxes been going up or down, and for whom? Which income groups have been winners and losers in recent decades? Did the new legislation continue past trends or shift things in a new direction?

During the fall semester of 2020, two economics department undergraduate students from the University of Utah, Nelson Lotz and Gabriella Rebol, researched this question by reviewing the results of the Institute on Taxation and Economic Policy's report series Who Pays: A Distributional Analysis of the Tax Systems in All 50 States, which was published in 2018, 2015, 2013, 2009, 2003, and 1995. Each of the reports looks at how much Utahns at each income level pay in taxes as a share of their income. The report includes all taxes paid at the state and local level, including sales, excise (including the gas tax), property, and income taxes,  The population is broken up into quintiles by income level, and the top 20% of earners are broken down even further. The table below shows the income levels for each of the income groups from the most recent year of ITEP’s data, 2018:

Income Group

Lowest 20%

Second 20%

Middle 20%

Fourth 20%

Next 15%

Next 4%

Top 1%

Income Range

 Less than $22,900 

 $22,900 to $39,600 

 $39,600 to $63,900 

 $63,900 to $104,300 

 $104,300 to $202,400 

 $202,400 to $486,500 

 Over $486,500 

Average Income

$14,100

$32,500

$50,600

$80,800

$139,400

$288,400

$1,300,500

Source: Who Pays? 6th edition 2018 Institute of Taxation and Economic Policy

 The Tableau charts below show the average tax rate for each of the income groups for each of the three major types of tax and for all Utah state and local taxes combined for each year of results.  The chart allows the viewer to show each year's results separately or together on the same chart so that it is easier to see what direction the trend is moving in for each successive year of data.

 

Discussion of Results

TOTAL INCLUDING ALL STATE AND LOCAL TAXES

Beginning with the results for the total of all state and local taxes, the data from ITEP show that from 1995 to 2018, Utah moved toward a more equitable tax system. In 1995, Utah’s tax system fit the classic definition of a regressive tax structure, with the overall effective tax rate including all state and local taxes being highest for the lowest income quintile at 12% of income and then falling steadily from there so that the highest income 1% of taxpayers paid the lowest tax rate of any income group, just 7.8% of their incomes. By 2018, however, the lowest income fifth of Utahns saw their overall tax rate fall to 7.5%, and the tax rate rose for each successively higher income level to 7.9% for the second quintile, then 8.2% for the middle quintile, and then 8.8% for the fourth quintile, those earning between $64,000 and $104,000. However, that 8.8% rate for the fourth quintile is the highest tax rate paid by any income group, and the tax rate falls sharply for higher incomes, reaching a low of 6.7% for the wealthiest 1% of tax filers, the lowest rate for any Utah income group.

Additionally, all of the quintiles have seen a substantial reduction in the total percentage of income paid in taxes from 1995 to 2018. This finding is consistent with research from the Utah State Tax Commission and the Utah Foundation finding that Utah has steadily reduced its overall level of taxation in recent decades.

Here is the percentage and dollar savings for each income group from the 1995-2018 overall tax reduction:

 

Lowest-income quintile 

 Second quintile 

 Middle quintile 

 Fourth quintile 

 Next 15% 

 Next 4% 

 Top 1% of filers 

Change in tax rate 1995-2018 (percentage points)

-4.5%

-3.5%

-2.8%

-1.7%

-1.9%

-1.4%

-1.1%

Change in annual tax paid (2018 $$)

-$720

-$1,330

-$1,680

-$1,598

-$3,116

-$4,746

-$18,194

Share of the total tax cut going to each quintile 

7.6%

14.0%

17.6%

16.8%

44.1%

Aggregate annual tax cut to each quintile (2018 $$)

$180 million $332.5 million $420 million $399.5 million

$584m   $237m    $227m

$1.049 billion total for top quintile

 

Thus, we can see that the greatest percent-of-income tax reduction over the time period 1995-2018 went to the lowest-income Utahns, while the largest tax cut in dollar terms went to the wealthiest. The total aggregate annual tax cut by 2018 added up to $2.38 billion. In other words, if Utahns had paid 1995 tax rates on their 2018 incomes, Utah state and local governments would have received an additional $2.38 billion in revenue.  

INCOME TAX

Income tax as a share of personal income has declined for Utahns of all income groups since 1995. The income tax remains the state's only non-regressive tax, lining up with Utah's top-heavy income distribution (though not as top-heavy as the nation's). Three-fifths of all personal income taxes are paid by the top one-fifth of taxpayers, which lines up with the state's income distribution, in which three-fifths of all income is earned by the top one-fifth of earners, according to Tax Commission data. 

PROPERTY TAX

For all income groups, property tax has dropped as a percent of income in Utah since 1995. As a percent of income, the tax is still heaviest on the lowest earning quintile. However, the tax no longer retains its entirely regressive structure. The second quintile of income earners in the state now pay the least in property taxes as a share of their personal income compared to other income groups. 

SALES & EXCISE TAXES

From 1995 to 2018, all of Utah’s income groups have seen a reduction in sales and excise taxes (mainly the gas tax) as a percentage of income. The lowest and second quintile have seen the biggest reduction in sales taxes with the lowest quintile’s sales taxes dropping from 7.5% of income in 1995 to 5.1% in 2018. In Utah, sales and excise taxes have a clear regressive tax structure with lowest quintile paying the highest rate and each successive quintile paying less.

 The December 2019 Tax Restructuring: Consistent with the 1995-2018 Tax Cutting Trend

To return to the question raised above: Is the December 2019 legislative action embodied in SB 2001 consistent with the 1995-2018 tax cutting trend or a break with tradition? The answer is clearly that it continues the tax cutting trend, as the legislation is projected to reduce tax levels for every income group, as shown in this chart: 

95 18 20 graphic

On the positive side, it is noteworthy that the largest percent-of-income tax cut in the December 2019 package goes to the lowest-income quintile of Utahns -- half a percentage point, from 7.5% of income to 7% of income. (This projection is based on the assumption that all low-income Utahns file for the new Grocery Tax Credit (GTC). If only 75% of low-income Utahns file for the GTC (the same percentage of eligible lower-income Utahns that file for the federal Earned Income Tax Credit (EITC)), then we project that the overall tax rate for the lowest-income quintile of Utahns drops to 7.2%, which is still the largest percent-of-income tax cut for any income group.)  

On the negative side (from the perspective of wanting to reduce Utah’s tax regressivity while still generating sufficient public resources to invest in Utah's next generation), it must also be noted that SB2001's largest tax cut in dollar terms goes to the top quintile of Utah earners – nearly half of the entire net in-state tax cut, or about $100 million out of the total net in-state tax cut estimated by the Legislature at $208 million -- with about $60 million of that $100 million going to the top 1% of Utahns, those earning over about half a million dollars a year. This works out to an average tax cut of $3,300 per household for the top 1%, compared to an average tax cut of about $80 per household for the lowest-income quintile of Utahns, if they file for the new Grocery Tax Credit (low-income Utahns who don't file for the new GTC will end up paying about $100 per household more each year in taxes). 

THIS ITEM IS AVAILABLE AS A DOWNLOADABLE AND PRINTABLE PDF FILE pdfHERE

 

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