One Utah

(Edited from the author’s own blog)

Yesterday’s special session of the Utah legislature went about as expected. Having already obtained the support of the Republican party, Huntsman’s tax reform proposals were all passed. Nor is Huntsman through; in an interview on KCPW today, he acknowledged that the legislation passed was only a first step in his tax reform goals. Huntsman reaffirmed his interest in continuing to move toward a flatter tax, ultimately abandoning the “dual-track” system and moving closer to a true flat tax (also see the Deseret News).

I’ve noted elsewhere 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 many of us are taught 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 all yachts.

So what are the merits of a flatter tax? Most 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. Charity should be done for its own sake, not because it benefits oneself. I wonder how often these tax loopholes are exploited in the same manner as the Leavitt family? 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.

Eliminate the tax breaks the government gives out for children. Each additional child puts that much more of a demand on our educational system. Why then should families with more children pay less? 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.

Virtually every time I’ve heard someone in Utah defend the tax credit for dependents (usually by those who would be considered middle-income or higher), their primary argument in favor of the tax credit is the question “Do you have any idea how expensive it is to raise children these days?” However, the relative expense of child-rearing these days is irrelevant to the question. For the most part—particularly among these middle-class families—child-bearing is a conscious choice. If you (as I do) feel that raising a large family is rewarding, worthwhile, and even in some senses a moral obligation, fine. You are welcome to make that choice, and I rejoice in that choice. But it is irresponsible for those with the means to provide for that family to try to shift the costs of that choice onto the government.

I believe that a moderate progressive tax is generally beneficial to the poor. fewer tax breaks means fewer opportunities for the wealthy to reduce their tax responsibilities, and thus more funds are available to serve the public needs (education, emergency services, social safety nets, infrastructure, etc). The tax burden on the poor is minimized because of the nature of the progressive tax. And the system becomes simpler to implement and follow.

Now that the special session has done its work, we can only hope that Huntsman’s rational is correct. He has claimed multiple times that the tax cut will benefit the entire population—and education specifically—by stimulating economic growth, luring new employers into the state, increasing the tax base, and thereby increasing the funds available for education. Dubious as it may be, lets wait and watch over the next few years. If the scenario plays out as Governor Huntsman predicts—economic development which benefits the lower classes as well as corporate Utah and the wealthy, and increased funds for education and other vital government programs—I’m willing to give credit where credit is due. Lets permit further reform and “flattening”.

But if the results are not what the Governor suggests—if the available funds for education stagnate or diminish and the economic development benefits only the upper-class at the expense of the poor—then I hope the citizens and politicians will acknowledge the mistake, work to repeal his plan, and pursue a truly egalitarian tax reform.

This entry was posted Thursday, September 21st, 2006 at 6:02 pm and is filed under Utah Politics. You can leave a response, or trackback from your own site.