The way state and local sales taxes are currently set up is not conducive to Utah’s prosperity long term. Middle- and low- income residents pay a higher percentage of their incomes in state and local taxes than high-income households. And, to make matters more serious, the sales tax base is eroding.
Around 40 percent of economic transactions are covered by the sales tax, down from about 70 percent in the 1980s. This is a problem because sales tax pays for a sizable portion of transportation and higher education costs, as well as paying for most other state-funded services, such as public safety, elections, courts, economic development and social services.
To remedy these issues, the Governor is advocating for sales tax reform in the 2019 Legislative Session. He recommends the following changes be made:
- Lower sales tax rate and/or other taxes
- Reinstate a uniform state sales tax rate by eliminating special reduced sales tax rates for select purchases
- Broaden the sales tax base by removing sales tax exemptions or exclusions for select purchases
- Emphasize water user fees over taxes for water
- Enact local fiscal reform – Address local fiscal incentives to align with good land use planning and state economic development policy, while maintaining local fiscal stability
The goal with sales tax reform is to put in place a state and local revenue system that is sustainable long term, fair to taxpayers and minimizes the impact of taxes on the economy.
Extending the sales tax base to a broader portion of the economy and reducing the rate will improve tax equity without increasing total state tax revenue, allowing the state to accomplish critical goals without increasing the overall tax burden. These changes are needed to prepare for coming growth while continuing the trajectory of living life elevated.