Association challenges Utah 'hidden' tax hike
Carbon County residents may not be aware that Utah virtually raises the state's individual income taxes by $4 million annually. Exceeding inflation and population growth, the $4 million increase occurs without debate, discussion or vote, maintains the Utah Taxpayers Association.
The Utah Legislature should index income brackets for inflation to prevent the hidden automatic hike, stresses the independent public policy watchdog organization.
When brackets are not adjusted, the percentage of an individual's salary taxed at the highest rate accelerates as income climbs, indicates the association.
As a consequence, income tax payments increase faster than wages. The result is especially pronounced for low wage earners.
For example, a Utah worker with an income of $14,000 will experience a 4 percent tax increase for a 3 percent increase in wages.
Utah's high tax burden, ranking 14th highest in the nation when measured as a percentage of personal income, is not caused by high rates but by low brackets, explains the watchdog organization.
Overall, Utahns pay 25 percent more toward state income taxes than residents in other states. Residents with incomes between $35,000 and $50,000 pay nearly one-third more than counterparts in other states.
Utah's highest rate, 7 percent, is basically the same as the average for the 34 states and the District of Columbia that have income tax with brackets, continues the association.
Several states have flat or no income taxes and only three have lower top brackets than Utah.
In the other 33 states, the top income tax bracket begins, on average, at $60,000. The 34-state average lowest tax bracket is $9,400. Utah's highest bracket registers at $8,626.
In the 1970's when inflation was a serious problem and "bracket creep" was a major issue, the United States Congress instituted automatic rate adjustments for the federal income tax.
Since 1973, tax brackets in Utah have been adjusted only once, points out the public policy watchdog organization.
The adjustment occurred when the 2001 Utah Legislature enacted a 15 percent income tax rate hike.
Had Utah's top bracket been adjusted continuously for inflation since 1973, the top bracket would start at $27,300 instead of $8,626.
In contrast to the state's individual income assessments, private property levies cannot be increased unless a truth-in-taxation process occurs, explains the association.
The designated procedure requires local governments to publicly disclose the intent to raise property taxes.
The local government taxing entities must then conduct a hearing to allow for public comment on the proposed hike.
State income taxes, on the other hand, climb every year without notification by the Utah Legislature or input from the public.
Opponents of indexing tax brackets argue that the government needs the additional revenue, even if the money is generated through a hidden tax increase, indicates the public watchdog group.
Since 1985, population expansion and inflation have increased at a combined rate of 128 percent across Utah, while state income tax revenues have accelerated by 294 percent.
The income tax monies collected from Utahns has increased at a significantly faster pace than any other source of state and local government revenues. By contrast, property assessment revenues, which are subject to truth-in-taxation guidelines, have increased 135 percent
The figure is roughly equal to inflation plus population growth statewide.
Total state and local government revenues in Utah have climbed by 192 percent since 1985, points out the association.
The increase is significantly higher than the 128 percent growth rate of inflation and population.
Clearly, government revenues have more than kept pace with the state's needs, indicates the public policy watchdog organization.
During the 2002 Utah Legislature, Sen. Curt Bramble of Provo introduced a bill that would have annually adjusted income tax brackets for inflation.
Due to the state's fiscal situation, the proposed legislation died in the Utah Senate even though the majority of the state lawmakers indicated support for the bill, concludes the association.