clock menu more-arrow no yes

Filed under:

Utah ‘way ahead of the curve’ in dealing with budget impact of COVID-19, Trump economic adviser says

Gubernatorial candidates also featured at tax conference

The Capitol in Salt Lake City is pictured on Thursday, Feb. 13, 2020.
The Capitol in Salt Lake City is pictured on Thursday, Feb. 13, 2020.
Spenser Heaps, Deseret News

SALT LAKE CITY — Stephen Moore, a member of President Donald Trump’s economic task force, said Friday that Utah is in good shape compared to much of the rest of the country to recover from the economic impact of COVID-19 but suggested getting rid of the state income tax.

Utah’s tax collections “have not been hit as hard as other states,” Moore said during a virtual appearance from Virginia at the Utah Taxpayers Association’s annual conference, crediting the decision not to “shut down your economy entirely” to stop the spread of the novel coronavirus.

The conservative economist also praised state officials the day after the Utah Legislature met in special session to deal with an $850 million revenue shortfall, slashing next year’s $20 billion budget that takes effect July 1 to $19.2 billion while still increasing spending for education and social services.

“You managed to balance your budget. You’ve acted in a fiscally responsible way over the last 10 years. You have a rainy day fund,” Moore told the business and community leaders gathered at the Grand America Hotel and watching online, calling Utah “way ahead of the curve.”

Utah’s revenue loss is “a good number compared to a lot of other states that are looking at 10% to 20% reductions in their revenue. Some states are looking at 25% hits in their revenue base. That’s a gigantic reduction. That’s because they shut down their economies,” he said, adding that GOP-led states like Utah are faring better.

But he said there’s more Utah can do to boost its economy, despite the state’s top marks in an annual economic competitiveness ranking put together by Moore and other economists for the conservative American Legislative Exchange Council.

“You do a lot of things right. Not everything right, but you do a lot of things right, especially compared to your neighboring states. So that’s a very positive picture, congratulations. Stay with it. I still think there’s room for improvement,” he said, including dropping the state income tax.

“There are nine states that operate without income taxes,” Moore said — Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, New Hampshire and Tennessee. “Those states significantly outperform other states.”

Utah, he said, should take advantage of being a tourist destination, as states like Florida do, and rely on sales rather than income taxes.

“Both from a fiscal point of view but also just from a strategic point of view, it would make more sense to tax people on what they consume in the state versus the income,” Moore said. “You can essentially tax outsiders who come into the state in a more effective way.”

Earlier in the morninglong conference, gubernatorial candidates were asked during one-on-one interviews about the state’s 4.95% income tax rate, part of the tax reform package that also raised sales taxes on food, gas and some services that was passed by lawmakers late last year and then repealed amid a citizens referendum.

Currently the Utah Constitution earmarks income tax revenues only for education, but lawmakers added an amendment on the November ballot to include “supporting children and individuals with a disability,” in an attempt to address issues resulting from lagging growth in sales taxes as consumer spending shifts from goods to services.

Five candidates participated — the four Republicans in the June 30 primary, Lt. Gov. Spencer Cox, former Gov. Jon Huntsman Jr., former Utah House Speaker Greg Hughes and former Utah GOP Chairman Thomas Wright, and Democratic nominee Chris Peterson, a University of Utah law professor.

Cox said Utah’s state income tax rate is already the 16th lowest nationwide. He pointed out that if Utah no longer had a state income tax, the state’s sales tax rate would have to be raised to 14% from the current 4.7% to make up the difference.

“I agree with those people that say we would be better off not having an income tax,” the lieutenant governor said. “If there was a way to continue funding education and get rid of the income tax, I would be wholly supportive of that.”

Most states are able to fund education largely through property tax, Cox said, but the federal government owns 70% of the land in Utah and the payments made by Washington, D.C., in lieu of taxes fall far short. He said Congress must be pushed to ensure Utah and other Western states receive their “fair share.”

If the federal payments go up, that money could be used “to lower the income tax so that we keep the students of Utah whole and we’re able to encourage economic growth by having a lowering income tax and matching some of our surrounding states,” he said.

Huntsman, who tested positive last week for COVID-19, said via video that he “looked at phasing out the income tax totally” as governor, but the tax reform plan passed more than a decade ago included eliminating exemptions and deductions, “substantially” lowering what was a 7% top rate and reducing the state sales tax on food.

“We left the tax code in a much more competitive posture, but that always needs to be worked on,” Huntsman said. “Because tax policy is never done. You’re always in a competitive battle with those states in your neighborhood and even those states that are not. ... Competition never stops.”

He said any future tax changes should be considered as part of an overall effort that will take time.

“I learned that lesson when we did tax reform initially over 10 years ago. That is, you can’t one-off these tax policies. You’ve got to bring them together in a comprehensive package. You’ve got to vet them with the public and the Legislature. It’s going to take longer than you think,” he said. “It’s not easy to do.”

Hughes said he’s worried about the effect on revenues of continued restrictions intended to stop the spread of the virus that include social distancing and limits on gatherings for much of the state’s population, although Gov. Gary Herbert has moved nine counties to the lowest-risk category.

“I just don’t know how any of that is going to grow in any way if we don’t have this economy running, we’re giving it a chance to get going,” he said, warning, “If we don’t have the economy running, there will be continued reallocation or funding adjustments that need to be made.”

The former House speaker says he likes having three major sources of revenue — income, sales and property taxes — available. “That broadens the base. In states where you don’t have one of those three legs, you’ll see a much, much higher property tax or a much higher sales tax.”

He supported the tax cut made when Huntsman was governor because even though taxes were cut overall, the state saw surpluses because the money was in the hands of households and businesses and created “more economic activity.”

Wright backed lowering the state’s single income tax rate.

“The best way to grow the economy is get government off of our backs and out of our wallets,” he said.

“So the degree to which we can reduce the income tax to be more competitive with states we are competing with — we are competing with states for businesses to relocate here — it would make a whole heck of a lot of sense to reduce the income tax rate,” Wright said.

He said the reduction in the state’s income tax rate to 4.66% was the “best part” of the failed tax reform package. While there are other tax changes to be made, Wright said trying to put all of the pieces of tax reform together into a single bill “was the big problem” with the most recent attempt.

Peterson called for a return to a progressive tax system that raises rates for higher earners.

“I would support that decrease in income tax, but only if it’s given to lower- and moderate-income Utahns,” he said. “So I will support a decrease in income taxes for low- and moderate-income Utahns provided that it comes with expecting a little bit more from those in Utah that are doing the very best” — the state’s billionaires and some of its multimillionaires “that are doing really well and can afford to give back a bit more.”