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My view: Tax reform should be the central focus of legislative session

SHARE My view: Tax reform should be the central focus of legislative session
FILE "” The Utah State Capitol on the opening day of the 2017 session in Salt Lake City on Monday, Jan., 23, 2017.

FILE "” The Utah State Capitol on the opening day of the 2017 session in Salt Lake City on Monday, Jan., 23, 2017.

Scott G Winterton, Deseret News

As I travel throughout the country, I am frequently asked, “How does Utah achieve so much economic success?” There are many ways to answer this question. I answer it in this way: Utah’s organized and united business community works closely with the governor and legislators to see around corners, anticipate and prevent problems and tackle tough issues. This combination of careful planning and tenacious problem-solving keeps Utah well ahead of other states that face many of the same challenges.

Utah has the opportunity, once again, to get ahead of and confront a complex challenge. While our community is thriving, we have demanding education, infrastructure, public safety and human service needs. Fortunately, I believe there is an ambitious solution to all of these issues: modernizing Utah's tax code.

I hope the governor and legislative leadership will commit to finding the best process, approach and options for meaningful tax reform, including a complete review of all existing taxes and fees while preserving legislative flexibility for future appropriations. While this is no small task, the Legislature can build on its incremental steps taken during the past two general legislative sessions.

Making our tax code meet today's needs: Over the past five years, the business community has advocated for greater accountability, innovation and investment in education. The tax code is both the problem and solution, as deficiencies have created the pressure to raise income tax rates for increased investment. The governor and legislators have expressed concerns about this effort, stating that it represents the least effective option to provide additional ongoing investment to Utah’s classrooms.

In fact, I believe the speaker, president and governor have the best and most efficient solution within their control — modernizing Utah’s tax code this session. Enhanced investment does not have to be the central focus of tax reform, but it should be a desired outcome.

There is already low-hanging fruit to address both modernizing Utah’s tax system and solving education funding challenges. For example, restoring the sales tax on food to its full rate with a targeted tax-credit to protect low-income families, and further raising motor-fuel taxes to reduce general fund earmarks would both enhance revenue and improve our tax code.

Making our tax code more competitive: The Utah economy is changing and so is our tax base. As a greater share of economic activity shifts to the largely untaxed service sector, revenues fail to keep pace with economic growth. This trend is compounded by changing purchasing patterns, digitization of goods and remote sales. We must act swiftly in the years ahead to adjust to this new economy.

For example, an estimated $100-250 million in sales taxes remain uncollected from just online sales alone. If Congress will not address this issue, the Legislature must act to address the significant financial burden on the state of Utah and its local governments.

We can also make our tax code more competitive while balancing the need for more revenue. A good place to start would be addressing sales taxes on manufacturing inputs and improving Utah’s corporate tax apportionment formula. Both of these reforms would greatly enhance our overall competiveness in attracting high-capital and high-paying jobs, and can be phased in over time to offset their overall cost through economic growth.

Making our tax code fairer: Recent reforms to the motor-fuel and basic-levy property tax sought to restore the erosion of each of those tax bases from inflation. Legislators should continue this principle by addressing the erosion of Utah's income tax and sales tax bases.

Utah offers more than 170 exceptions to the tax code and inducements to incentivize behavior. Strikingly, about 111 of these exemptions have an unknown dollar value. There must be greater accountability for tax exemptions and tax credits with defined goals and measurable outcomes. This is critical to ensure we preserve tax credits that have a purpose and work to enhance economic growth, while rescinding those that unfairly burden the rest of the tax code.

All of these proposals, and certainly others, deserve consideration to meet today's needs, make our state more competitive and create greater equity and efficiency. I am encouraged by the leadership and attention to this issue by the governor and legislative leadership. Over the next few weeks, I look forward to working with them to take advantage of this opportunity and make modernizing Utah’s tax code a signature achievement of this legislative session.

Lane Beattie is the president and CEO of the Salt Lake Chamber.