How Can Utah Remain Ahead of the Pack? Utah in National Comparison - - PowerPoint PPT Presentation

May 21, 2019

How Can Utah Remain Ahead of the Pack? Utah in National Comparison

Jared Walczak Senior Policy Analyst Center for State Tax Policy jmw@taxfoundation.org

A GROWING ECONOMY

GDP GROWTH, UTAH AND PEERS, 1997-2018

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

GDP Growth, 1997-2018

U.S. Average Utah

State Growth Utah +97% U.S. Average +53% Arizona +68% Colorado +73% Idaho +68% Nevada +75% New Mexico +21% Wyoming +71%

UNIQUE FEATURES

OF UTAH’S ECONOMY AND TAX CODE

• Utah earmarks 100% of individual and corporate income taxes,

about 32% of sales tax

• Alabama earmarks 98% of PIT, but not CIT
• Massachusetts earmarks 40% of PIT and CIT
• Only five other states earmark more than 10% of their PIT

Earmarking of Tax Revenues

• Less than a third of Utah’s land is privately owned
• Three-fourths of population is concentrated in four most populous

Wasatch Front counties

• Eighty-five percent of taxable value concentrated in six counties

Density and Land Ownership

UTAH’S ERODING SALES TAX

COMPARED TO U.S. AVERAGES

40% 60% 80% 100% 120% 140% 160% 180% 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

% Change in Share of Total Tax Collections

U.S. Sales U.S. Income Utah Sales Utah Income

SALES & INCOME TAX FLIP

PIT NOW GENERATES MORE REVENUE

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 1932 1934 1936 1938 1940 1942 1944 1946 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Income & Sales Tax Collections as a Percentage of State Income

Income Sales (unearmarked) Sales (all)

SALES TAX BASE DECLINE

BARELY HALF ITS POST-WAR BREADTH

30% 40% 50% 60% 70% 80% 90%

Utah's Sales Tax Base as a Percentage of Personal Income

State Growth Utah 41% Arizona 37% Colorado 34% Idaho 40% Nevada 54% New Mexico 58% Wyoming 45%

BASE BROADENING

SALES TAX EXPANSION IN OTHER STATES

• Personal services, including landscaping, pet care, small animal veterinary, fitness and

recreational, diet and weight loss, limousine, bowling, campgrounds, extended warranties Kentucky

• Services where providers already had a SUT obligation—installation, repair,

maintenance, service charges North Carolina

• The new economy: digital goods, software as a service, ride sharing, and certain other

personal services Iowa

• Personal services linked to tangible goods or real property

District of Columbia

WHY IT MATTERS

SHOULD WE CARE ABOUT BASE EROSION?

• Broad bases and lower rates more equitable and

economically efficient

• Shifts revenue toward less pro-growth PIT

Promoting Economic Growth

• Consumption taxes are economically efficient and can

be stable, but current design isn’t

• If sales tax is unreliable compared to earmarked taxes,

can lead to poor tax policy decisions during a recession Ensuring Stability

May 21, 2019

Questions?

Jared Walczak Senior Policy Analyst Center for State Tax Policy jmw@taxfoundation.org