Independent association analyzes Utah income tax burden
In 2002, the typical family residing in Carbon County and across Utah paid 27 percent of total household income in federal, state and local taxes last year.
Last year's figure represents a slight decrease from the 28 percent tax burden shouldered by Utahns in 2001.
A significant reduction in federal income taxes accounted for the overall reduction in the burden from 2001 to 2002.
Due to changes in the federal law, local residents currently pay more income tax to Utah than to the United States government.
The Utah Taxpayers Association annually calculates the financial burden assumed by a statistically typical family living at locations throughout the state.
The association bases the annual analysis on a two-parent, three-child family living in a median priced home and earning the median Utah wage.
In 2002, the independent public policy organization factored in adjusted gross income of $55,043.
The adjusted gross income figure excluded $1,702 paid into a tax-deferred 401(k) account by the individual and the employer.
When determining tax burden as a percent of total income, the association's study included the family's adjusted gross income and 401(k) contributions as well as the employer's payments to Social Security, Medicare, workers compensation and unemployment insurance.
Americans received a benefit when the U.S. Congress approved the creation of a new bracket that imposes a 10 percent rate on taxable income up to $12,000 for married couples filing jointly.
Previously, all taxable income up to $45,200 was taxed at 15 percent. The change reduced federal taxes by $600 for all households with incomes exceeding $12,000, indicated the state's independent public policy organization.
The state's tax burden as a percent of adjusted gross income increased slightly from 2001 to 2002 for two reasons, explained the association.
First, 50 percent of the money paid to the federal government by Utahns can be deducted on the state's income tax returns. Therefore, the typical family's state income taxes increased $21 due to the federal government's creation of the 10 percent bracket.
Second, Utah refuses to adjust state income tax brackets for inflation. Therefore, 100 percent of the increase in taxable income, primarily due to inflationary factors, was taxed at the top rate of seven percent.
By assessing all inflationary income increases at the top bracket, the state tax rate effectively climbs every year, indicated the independent public policy organization. Although relatively small, the annual tax rate increases are cumulative.
The Utah Tax Commission estimates that indexing state income brackets for inflation would save residents $4 million in the first year and $8 million in the second.
The typical Utah family pays numerous taxes and fees. The taxes and fees can be categorized into eight major groups
Employment or payroll assessments represent the largest single group of taxes shouldered by Utahns, pointed out the independent public policy organization. The group accounts for 29.1 percent of all taxes and consumes 7.8 percent of the average Utah family's total income.
Taxes tied to workers' wages are paid directly by employers. The assessments include workers compensation, unemployment insurance as well as the employers' share of Social Security and Medicare.
Employees are required to pay 6.2 percent of wages toward Social Security and 1.45 percent of annual income toward Medicare, added the association. Matched by employers, the amounts are included in the job-related taxes category.
The employee portions of Social Security and Medicare paid by Utahns last year comprised approximately one-quarter or 25.5 percent of all taxes and 6.8 percent of total income.
State and local sales along with excise taxes comprised slightly more than one-tenth or 10.8 percent of all related assessments paid by Utahns and 2.9 percent of total income.
The assessments consist of the statewide general 4.75 percent sales tax on purchases, a county 0.25 percent sales option, a city one percent option, one percent on prepared meals and a utility franchise fee of up to six percent on electric, gas and telecommunication services.
The state's general sales tax rate on electric and gas utilities dropped from 4.75 percent to two percent last year.
In addition, Utahns purchasing beer, liquor and tobacco pay excise taxes on the purchases.
Prepared meals are also subject to state, city and county general sales taxes.
Utah's general sales assessments accounted for 62.1 percent of the total state and local sales and excise taxes in 2002.
County and municipal general sales taxes amounted to 21 percent and utility franchise taxes accounted for 10.1 percent.. Restaurant and excise taxes accounted for the remaining 6.8 percent, indicated the association.
The typical Utah family paid 1.4 percent of total income toward motor vehicle taxes. Seventy-one percent of the amount involved state and federal gas taxes. Age-based fees accounted for 22 percent of the total auto tax in 2002, concluded the independent public policy organization.