Some Utah policymakers are proposing legislation this year that would increase generally applicable taxes on income and gasoline. Not surprisingly, these proposals have drawn the attention of the media and Utah pollsters, who have found that Utahns oppose raising income taxes for education.
Utahns’ hesitancy regarding tax increases is well founded. Government has a history of inefficiency (driven by a relative lack of systematic accountability for government-funded programs) and seemingly endless expansion (due to natural political forces). So it is very reasonable for Utahns to balk at the idea of giving more of their hard-earned money to government.
On the other hand, meaningful freedom requires limited government – or good government, in other words. And that has to be paid for with taxpayer dollars. Given the natural conflict between the freedom-based need for tax dollars and the reasonable impulse to be skeptical of tax increase proposals, how should Utahns and Utah policymakers evaluate such proposals?
One fundamental question (but certainly not the only question) to ask is: “Will this tax increase proposal bring fundamental, beneficial reform to government that serves the common good?” If a proposal to take more money from taxpayers cannot answer at least this question with a clear and convincing “yes,” then it is probably not a proposal worth considering further.
So take the proposal to raise individual income taxes by 20 percent (upping the rate from 5 percent to 6 percent). The money generated by this proposal (estimated to be $585 million in 2016) would go mostly toward providing bonuses to teachers based on performance, with the remainder being invested in digital learning.
Certainly, these reforms are steps in the right direction for public education. But are they truly fundamental and beneficial reforms that merit a tax increase? While encouraging improved teacher performance via bonuses is a good idea, the large majority of teacher pay would continue to be based on factors that are “not strong predictors of teacher effectiveness.” Additionally, while technology is certainly an important element to improving public education, technological upgrades do not represent a fundamental reform of schools that create a reasonable expectation of benefit to children, families and society.
To put it differently, the kinds of fundamental reform of public education that would merit serious consideration of a tax increase are going to be found in the nearly $3 billion in taxpayer dollars that the public education system is currently spending, not in the hundreds of millions of dollars we might raise through increasing income tax rates. Instead of partnering a significant tax increase with fundamental and beneficial reform, the current income tax increase proposal partners a significant tax increase with reforms at the margins. From this perspective, the current proposal to raise income tax rates in Utah is bad policy.
The proposal to raise the gas tax is somewhat more difficult to evaluate, if only because there is more uncertainty regarding what this proposal actually will be. One formulation is to simply raise the current gas tax (24.5 cents per gallon) by 5-10 cents, a 20-40 percent increase – in other words, attach little to no policy reforms at all to a gas tax increase. This would clearly fail the “fundamental reform test,” especially in light of the fact that the current gas tax structure (taxing gallons of gasoline in an increasingly gas-efficient world) is one of the main causes of the transportation funding issue that is used to justify considering gas tax hikes in the first place.
A second gas tax proposal is to replace the per-gallon state gas tax with a sales tax on gasoline (a percentage of the current per-gallon price of gasoline) that would not collect more taxes from Utahns in the short term, but would do so as gas prices increase over time. This proposal would constitute a fundamental reform of how the gas tax is collected. It would also serve the common good by collecting the additional tax revenue needed to meet funding shortfalls for critical road construction and maintenance incrementally over time. In other words, a sales tax on gas benefits society by avoiding significant, sudden gas tax hikes that are difficult to absorb for families and businesses, and therefore disrupt their lives and economic well-being in a harmful way.
Additionally, the sales tax on gas would serve the common good by: (1) ensuring that the state’s freeways, roads and bridges remain safe to travel on, and (2) providing the necessary increases to road capacity so that individuals and families can have the mobility and freedom required for economic prosperity, even as Utah’s population continues to grow.
All of that said, the proposal to shift from a per-gallon gas tax to a sales tax on gas may ultimately not be good policy. But at least it has some of the basic requirements as a tax increase proposal to merit serious consideration.
Whatever Utah policymakers ultimately decide to do regarding proposals to increase taxes in Utah, they should ensure that all such proposals include fundamental and beneficial reforms to the areas of government which they propose to fund before they are given serious consideration. This is not only necessary to make a tax increase good policy (i.e., the right policy, in the right way, for the right reasons) but will be critical to convincing naturally (and rightly) skeptical Utah voters that a tax increase is the right thing for Utah.
Most importantly, it is what families and taxpayers in Utah deserve.