Association analyzes statewide tax commission exemption data
Contrary to popular belief, not all of Utah's tax exemptions benefit the state's business community.
For example, businesses receive 47 percent of the state's total annual sales exemptions, indicated the Utah Taxpayers Association's latest analysis of statewide data.
On the other hand, primary residences in Utah receive a 45 percent exemption on property taxes.
The annual exemption virtually shifts the $204.7 million in taxes toward different types of property.
The majority of the annual primary residence exemption is shifted toward locally and centrally assessed businesses, pointed out the independent public policy organization.
The remainder of the $204.7 is shifted toward secondary residences, unimproved property and agriculture.
Unlike sales and income taxes, the exemptions in question automatically increase rates for all property taxpayers unless funded by a state general fund appropriation, noted the association.
Under Utah's truth-in-taxation law, local governments are guaranteed the same amount of property assessment revenues collected in the previous year plus new growth.
When an exemption is created, certified tax rates are automatically increased on all property owners.
If the 45 percent primary residence exemption were eliminated, property tax rates would decrease on average by roughly 30 percent.
The decreased rate would apply to all property owners, including primary residences, indicated the taxpayers association.
Primary residences would experience a significant increase since the decreased rate would be more than offset by an 81.8 percent jump in the taxable value of primary residences.
Overall, primary residential property taxes at locations statewide would increase on average by about 27 percent.
Vehicle fee payments are based on fixed schedules, not on market values or property tax rates. Therefore, the vehicle fees in lieu of taxes are not directly impacted by the 45 percent primary residence exemption.
In addition to the 45 percent primary residence exemption, homeowners in Utah do not pay taxes on non-vehicle personal property, pointed out the public policy organization.
But businesses pay personal property taxes on items exempted for homeowners, including computers and related equipment, kitchen appliances and furniture, concluded the independent public policy organization.
Elected officials, the spending lobby and the media frequently refer to $566 million in business sales tax breaks even though more than one-half of the designated amount is actually not private enterprise related, pointed out the independent public policy organization.
The frequently cited sales tax exemption total includes the $28.4 million for energy used in the manufacturing process.
But not included in the total amount are the reduced sales taxes on energy usage for residences.
Households in Utah presently pay 2 percent state sales tax on energy consumption instead of the normal 4.75 percent, added the association.
The decreased rate reduces sales taxes by $27 million per year.
If the amount were included in the total amounts, non-business sales tax exemptions increase to 55 percent of the state's total.
Taxes should occur at the final stage of consumption because assessing business inputs during various phases of production tends to hide the cost of government, maintained the association.
Currently, only certain business inputs are exempted from sales taxes, including manufacturing equipment, energy used during manufacturing process and agricultural machinery.
Municipally operated power companies are currently exempt from the majority of sales taxes on inputs, added the association. The municipal suppliers and PacifiCorp do not actually compete for consumers. But PacifiCorp customers have sales and property taxes on business inputs imbedded in utility bills while municipal consumers do not for the most part.
If business inputs are subject to sales taxes, then pyramiding occurs as assessments are applied at all stages of production, concluded the independent public policy organization.