Conservative ideas help balance conflicting interests in tax policy

One of the benefits for free society – for families, individuals, businesses, and others – that conservative principles and thinking provides is the possibility for balancing realities and principles that may seem to be in conflict, resembling the balancing act that any person must do in life in order to find lasting human happiness. Rather than imagining up idealistic, and often simplistic, concepts and trying to force the world to fit into the box we have created for it (e.g., the “individual liberty” of libertarians and the “equality” of liberals), the conservative perspective seeks to ground its thinking in the sometimes complex and conflicting realities of life, using prudence as its ultimate guide in crafting public policy based on these realities.

A string of recent reports on taxes provide a good case study in what this looks like, and why it matters.

Two weeks ago, the Tax Foundation – a national think tank that publishes basic information about the structure of federal, state, and local tax systems in the United States – published a report on state business taxes that found Utah had the 10th best business tax climate in the country. This put Utah behind two of its immediate neighbors – Wyoming (1st) and Nevada (3rd) – and ahead of the rest – Colorado (8th), Idaho (20th), Arizona (25th) and New Mexico (38th). In other words, Utah is one of the best places in the region and even nationwide to do business, as far as taxes are concerned.

In a second report on state and local taxes (i.e., taxes paid by residents generally) issued by the Tax Foundation just today, Utah did not rank as highly. The Tax Foundation ranked Utah’s state and local tax burden as a percentage of state income (9.3 percent) at 29th highest in the country (or 22nd lowest). This result reinforces the findings in a recent report on taxes and government spending in Utah from the Utah Foundation, which reported that Utah had the 31st highest tax and fee burden in the nation (i.e., including mandatory government fees as well as taxes), based on tax and fee revenues per $1,000 of personal income in the state.

Going back to the Tax Foundation report, Utah again came in behind Wyoming and Nevada on the tax burden, which were in the top 10 of this measure. But Utah also had a higher state and local tax burden then most of its other immediate neighbors as well, including Colorado, New Mexico and Arizona. Idaho was the only state in the region with a higher tax burden than Utah.

In short, these reports suggest the possibility that Utah may be a better place to do business than to live in when it comes to taxes. Is this a good thing or a bad thing, and what does that mean for public policy? Here is where conservative principles and thinking serve to benefit Utahns.

On the one hand, keeping business taxes low is good from the perspective of the free market. Low taxes on business make it easier for entrepreneurs to start and grow new businesses in Utah, or to bring existing businesses to Utah. This means more jobs for Utahns, resulting in stronger economic growth, more income for Utahns and their families, and more economic opportunities for Utahns to improve their lives for themselves and their children.

On the other hand, if keeping business taxes low means that the overall tax burden on residents is higher, that might not be as good for communities in Utah. While keeping business taxes low creates more jobs, incomes and economic opportunities for Utahns, shifting the tax burden to residents generally takes all of those things away. The more government increases the tax burden on residents, the more it intrudes on residents’ lives and the less money residents will have to improve their lives, provide for their children, and care for their neighbors.

In short, the “right” tax policy – the policy that benefits Utahns’ lives and protects their freedom the most by providing the economic opportunities and growth they want while protecting the freedom and communities they need – is one that strikes the proper balance between the market, communities, and limited government, all of which are essential aspects of conservative thought.[1] It is hard to see where that balance is to be found (or maintained beyond the next election cycle) by following simple calls to maximize “individual liberty” or “equality.”

Certainly (in my view, anyway), libertarians and liberals have some useful and constructive insights for public dialogue and policy. However, it is an open question as to how many genuine solutions to complex social problems – stemming from the complexities of real life – that these systems of thought can provide.

[1] For examples of conservative thinking on the ideas of the free market, community, limited government, see Economics in One Lesson, A Humane Economy, The Quest for Community, and The Road to Serfdom.