Utah must not take its business climate for granted and should remain vigilant in its effort to reduce unnecessary local regulations.
Businesses already face a litany of federal regulations that take time and money to satisfy — the rules of the Affordable Care Act, overtime regulations and the federal tax code, to name a few. States ought to be sensitive to this and avoid any further regulations that add to the burden without showing any benefits.
At the same time, state and local governments should be careful to create a level playing field among businesses, not unduly showering tax benefits on one to the detriment of its competitors.
The Salt Lake Chamber issued a report recently on regulations in Utah, titled, “The Cost of Doing Business: Improving Utah’s Regulatory System.” Its premise is that, despite the state’s consistent top ranking by publications as a great place to do business, Utah is losing ground to other states that take the reduction of unnecessary regulations more seriously.
The report mentions taxes, the cost of doing business and the legal environment as three concerns. We note a bit of irony in this, as the state’s business leaders also recently gave support to an initiative that would raise taxes in Utah by 17.5 percent to help schools.
Clearly, however, a state’s education system impacts its future workforce, which impacts the health of its business climate. But this underscores how the matter can be more complicated than it may appear on the surface. A state’s business climate includes amenities beyond taxes and regulations.
Five years ago, Gov. Gary Herbert issued an executive order barring “unnecessary burdens” on businesses through nonessential rules and regulations. A subsequent study found slightly less than half the existing rules either were unjustified or unclear. But the Chamber’s report said this effort was not as thorough or ongoing as it ought to have been, and 21 states are doing a better job of it.
The report recommends subjecting every new rule to a quantitative analysis of its fiscal impact. It also recommends using the legislative fiscal analyst’s office to study all pending legislation with regard to whether it contains regulations that would affect businesses and the state’s economy, similar to how bills currently are examined for their overall fiscal impact.
These are good recommendations. No state’s regulatory environment is static. It makes sense to continually study new rules and laws with regard to their impact. Doing so would protect businesses and ensure the state remains attractive to companies looking to relocate.
But businesses are affected in other ways, too, and it also makes sense to protect taxpayers. State and local governments give far too many tax breaks to individual businesses without a thorough examination of the impacts. This is a nationwide problem. Four years ago, a New York Times investigation found that cities and counties give away a combined $80 billion or so in tax incentives on a yearly basis — money that might have been used for legitimate government purposes.
We recommend a total accounting of these in Utah, especially when the tax breaks are used by one Utah city to lure a retailer from another Utah city. The overall benefits of such a deal seem negligible.
Utah has built an admirable business climate in recent decades. This involves a favorable tax structure and the wise cultivation of other amenities that make the state attractive. As the Chamber’s report indicates, such a climate should not be taken for granted.