Filing taxes? Utah’s burden is 2nd highest among Mountain States

This time of year, most Utahns’ minds turn toward thoughts of … their state and federal income taxes.

state local tax burdens

During the joyful process of filing a tax return, it is natural (and healthy for the sake of freedom) to be a bit concerned about with how much time (e.g. filing taxes) and money it takes to fund government. And it’s natural to wonder whether government elsewhere requires a smaller bite of your income, even if you have no intention of moving.

Enter the Tax Foundation’s “Annual State-Local Tax Burden Ranking.”

According to this year’s Tax Burden Ranking (based on 2011 data – the most recent data available) Utah had the 28th highest state and local tax burden in the country, at 9.4 percent of income. This reflects the conservative lean of Utah policymakers relative to the rest of the nation, to the benefit of Utah taxpayers.

When compared only to its Mountain States neighbors, on the other hand, Utah’s state-local tax burden comes in second out of eight.

Here’s how the Mountain States shake out, again with the percentages representing the combined state-local tax burden as a percent of income in Utah:

        1. Idaho               9.4%
        2. Utah                9.5%
        3. Colorado         9.0%
        4. Arizona           8.9%
        5. New Mexico   8.6%
        6. Montana          8.6%
        7. Nevada            8.1%
        8. Wyoming        6.9%

One question this latter comparison naturally raises: Is Utah’s state-local tax burden is high for the Mountain State region because it relies less on federal funding to pay for government? Fortunately, the Tax Foundation also publishes data that can inform the answer to this question. It’s included below, along with how Utah’s dependence on federal funding compares to its neighbors.

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  1. Nevada            27.1%
  2. Utah                31.6%
  3. Colorado         32.1%
  4. Idaho               38.2%
  5. Wyoming        39.6%
  6. Montana          41.9%
  7. New Mexico   42.6%
  8. Arizona           45.7%

It seems that Utah does rely less on the federal government than its neighbors to pay for government. However, it is interesting to note that: (1) the Mountain State with the lowest state-local tax burden – Wyoming – is far from the most reliant on federal funding, (2) the Mountain State with the highest state-local tax burden (Idaho) is not close to being the least reliant on federal funding, and (3) the Mountain State with the least reliance on federal funding (Nevada) has the second lowest state-local tax burden. So while it may be true in Utah’s case that its state-local tax burden is high relative to its neighbors because its reliance on federal funding is less, the data do not consistently support this conclusion.

On a final note, according to the Tax Foundation report, Utah’s state-local tax burden has shown a downward trend since 2005. While it hovered at 10.2 or 10.3 percent between 2005 and 2008, in 2009 it dropped to 9.8 percent before falling to 9.5 percent in 2010 and then to 9.4 percent in the most recent year’s estimate. In other Mountain States, on the other hand, the state-local tax burden either dropped less significantly (Arizona, Idaho, Montana, Wyoming) or actually increased (Colorado, Nevada, New Mexico) during that same period. So while Utah’s most recent state-local tax burden may be higher than its regional neighbors’, it is also on more of a downward trend than those neighboring states.

Happy tax season!

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