Opinion: Will this be the year of the tax cut in Utah?
Of course, there is a lingering worry that the good times won’t last. If you’re a lawmaker, the last thing you want is to raise taxes next year because you cut them too much this year.
When Utah lawmakers convene their 2022 regular session on Tuesday, they will be one of only 14 so-called citizen legislatures left in the country.
The National Conference of State Legislatures defines a citizen legislature as one where elected representatives serve part time and generally, unless they are retired, hold down full-time jobs, as well.
Utahns should appreciate breathing this rarified air while they have it. Of the 14, Utah has the largest population, and it also had the highest growth rate among any state during the last decade. States tend to gravitate toward full-time legislatures as they grow larger and their issues become more complex and expensive.
Electing someone you might have to do business with makes for more responsive lawmaking. At times, that can translate into some bills based on nutty ideas. But it also means lawmakers know they have to face the people they serve on a regular basis, and perhaps rely on them for business.
Critics may complain that requiring lawmakers to support themselves through other jobs is inefficient and empowers bureaucrats who do spend full time on state issues, but one thing is clear: Citizen legislatures tend to keep taxes low.
A 2000 study by Stephanie Owings of the U.S. Naval Academy and Rainald Borck of Humboldt University in Berlin looked at the effect of professional lawmaking on budgets in the U.S. Their conclusions, published by Sage Journals, found that “state government expenditure per capita is significantly lower the less professionalized the state legislature.”
That’s important to remember as this legislative session convenes.
Tax money is rolling in. When he unveiled his proposed budget last month, Gov. Spencer Cox estimated the state has a $1.16 billion surplus in ongoing funds and a $1.87 billion surplus in one-time funds, making for a combined excess of more than $3 billion.
And while no one seems entirely sure whether the riches will continue to roll (federal stimulus money has to account for some of the current excess), expect to see proposals to cut taxes.
The Senate Executive Appropriations Committee is recommending $160 million in cuts. The governor would like a refundable grocery tax credit. Others want to eliminate the state’s portion of sales tax on food altogether. Still others want to reduce the state’s flat income tax rate from 4.95% to 4.9%.
Given the size of the surplus, these are modest ideas. Expect outside forces to urge something much bigger.
In a November post on its website, the Utah Taxpayers Association argued for reducing the income tax to 4.5%. Don’t treat all the money as temporary, and don’t worry about rainy-day funds; they’re already flush, it said.
“The long-term outlook for Utah’s economy is strong, and one of the most important ways to ensure it continues on a healthy path is to lower our tax burden,” the post said, adding that the economy benefited when lawmakers boldly adopted a flat tax in 2006, effectively reducing the rate from 7% to 5%, “and it will work again this time.”
That may be a tough sell, given that the income tax is dedicated to public schools, colleges and universities, and to some programs for children and disabled people. But the argument that lower taxes leads to growth always gets some traction.
This time, it might be bolstered by a new report from the Tax Foundation, a Washington think tank, that found high-tax states losing population to low-tax states in 2021. The nation grew by only an estimated 0.1% last year, but New York, California, Illinois, Hawaii and the District of Columbia all lost people, while Utah, Montana, Arizona and other low-tax states gained. Idaho grew by a whopping 3.4%.
As the report notes, a lot of factors likely contribute to someone’s decision where to move, but the foundation said the tax-rate correlation is too consistent to ignore. People want to go where it costs less to live.
Utah isn’t the only state that might reduce taxes. It’s hard to argue for keeping excess money when it’s forcibly extracted from taxpayers’ wallets.
Then again, there is that lingering worry that the good times won’t last.
Fitch Ratings in New York warned in October that state tax cuts could backfire. Referring to last year, it said, “U.S. states reduced taxes to a greater extent than anticipated … with some of the biggest changes likely to necessitate difficult budget choices in the future.”
If you’re a citizen lawmaker, doing business with the people you represent, the last thing you want to do is raise taxes next year because you cut them too much this year.
Maybe, in addition to keeping government growth down, citizen legislatures also force politicians to act with greater prudence.