Utah “Tax Reform”

Tomorrow begins the special session of the Utah legislature which Utah Governor Huntsman called for with the goal of implementing tax “reform,” primarily by introducing a flatter tax option for citizens to choose in place of the traditional system.

I’ve noted before that I have some respect for Governor Huntsman, and feel he is a fairly honorable politician. Because of this, I am more inclined to give this proposal the benefit of the doubt than I might have been had this proposal come from Governor Leavitt or Republicans in the legislature. And I am certainly not opposed to tax reform in principle. The current Utah tax code in unquestionably complex—is there any state or nation whose tax code is not complex?—and could use simplification. I’m confident that virtually everybody would prefer a tax code which is simple to understand and quick to calculate.

But I’m wary about the nature of a flat tax. The principles of progressive taxation are well-reasoned and well-supported by history. Who is it whom benefits most from the functions of government? Who benefits most from the development of infrastructure, from both internal and foreign security, for the protection of private property, from the management of natural and public resources, etc? One could easily argue that it is the wealthy. It is by the use of public services, the protection of private property, the permission to use natural and public resources, etc, that the wealthy accumulate and maintain their wealth. Were it not for the effective functioning of government, it would be more difficult for the wealthy to obtain their wealth. As they derive the greatest economic benefit from the government, why should it be considered unreasonable for them to make the greatest contribution?

Jim Wallis of the Sojourners has frequently in books and speeches made the point that budgets are moral documents. They represent what we believe in, what values we hold. He makes a compelling case. I must admit that it is one with which I’m not entirely comfortable, as it seems to lead down the slippery slope of legislating morality. But is a very interesting concept, and one which seems very much in line with the conservative majority in Utah. One of the important moral principles which we are taught by the Lord is “of him unto whom much is given much is required (D&C 82:3).” Why should we not expect or require more of those to whom much has been given? After all, the poor require a far greater percentage of their income for basic needs. Far less of their income is available for other expenses, such as taxation. The percentage of the income of the wealthy which is needed for basic sustenance is far smaller, and thus they have more available to help pay for the services from which they derive so much benefit.

The Right might wish to build straw men in response to these claims. But any such attack would be without merit. I’m not suggesting a widescale escalation of progressive taxation, any dramatic shifting of the responsibility for financing government to the rich. The current rates seem essentially productive and fair. Nor is there much substantiation to the grim warnings about economic doom in the wake of progressive taxation. We can look back at the history of the U.S. and see that the nation has prospered most since adopting a progressive tax. Such a tax has permitted the benefits of economic growth to truly raise all boats, instead of merely raising all yachts.

So what are the merits of a flatter tax? All logic and evidence suggests that they benefit only those who need the least help; the wealthy. As the Salt Lake Tribune article notes, “The Utah Tax Commission analysts say only about 4 percent to 5 percent of the richest Utahns will benefit from the flat tax.” Why push forward tax reform—in a special session, no less—which will help only a small handful (comparatively) of people?

The potential loser is, as usual, our children. State funding for public education in Utah comes primarily from income taxes, and so the $76 million reduction in revenues will pinch the education budget, already spread thin by our large population of students. If budgets are moral documents, what is a greater priority: more tax breaks for the rich, or preparing our children to be successful and productive citizens?

If we want to try reform, here are a couple of ideas:

Remove the tax break for charitable giving. The Lord wants us to give tithes and offerings not because it will reduce our tax load, but because we have faith in his blessings and gratitude for all he has given us. If charitable giving goes down because their tax breaks are taken away, I guess we’ll be able to tell the sheep from the goats.

Why do families in Utah get tax breaks for having children? Each additional child puts that much more of a demand on our educational system. Why then should they pay less? My wife and I hope that we can someday have a large family. But that is a conscious choice we hope to make, and one which we understand will entail sacrifices. We recognize that every child we will have will consume more private and public resources. The government should not be falsely reducing the cost of those public resources, particularly for those who have the ability to pay for those resources.

I hope that this is a sincere effort by the governor to establish a simpler tax code which will truly benefit all Utahns. But I can’t help being cynical when it comes to flat tax proposals and to special legislative sessions. It sounds too much like an attempt to railroad a proposal which doesn’t bear up under slow, careful analysis. I’ll be watching the proceedings carefully to see which is the case.

2 Responses to “Utah “Tax Reform””

  1. Thom Says:

    Interesting points, but I doubt that your proposals are likely to help the poor, either. It’s true that many wealthy people (myself included) take advantage of tax breaks by giving money to charity, but many of those charities (including the church) spend a lot of that money helping the poor. Raising my taxes (by reducing the charity break) will reduce the amount I give not because I’m doing it to take advantage of tax breaks, but because the tax breaks mean I have more money to give. I think the child tax breaks/credits are an even bigger issue. In most of the world (Utah may be an exception), family size and income are inversely correlated. So, as you increase the tax on children, you’re predominantly hurting the poor. The tax difference for a child is pretty insignificant to someone making $250k a year. (You’re also inducing the middle class to have even fewer kids to support Social Security for the poor and middle class elderly.) I’m not saying that I completely oppose your ideas (nor that I’m in favor of a flat tax), but I think the discussion is more complex than you make it out to be. (Of course, you can only fit so much detail in a blog post. I’d ask for your take on a national sales tax, but I think I’m out of room.)

  2. Derek Staffanson Says:

    You’re right, Thom, the issues are more complex than I’m making them out to be, largely because of time/space constraints. But I should and will clarify my proposals.

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