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Gardner Institute briefs committee on tax‑system tradeoffs: income tax fastest growing, property tax most stable
Summary
Kemp C. Gardner Policy Institute presented long‑term revenue trends showing Utah’s income tax is the most volatile/growing revenue stream, sales tax base has narrowed, and property tax is the most stable source — implications for budget volatility and rainy‑day reserves were discussed.
The Kem C. Gardner Policy Institute told the Revenue and Taxation Interim Committee that Utah’s tax portfolio presents trade‑offs: individual income tax is the fastest‑growing and most volatile major revenue source, the sales‑tax base has narrowed as the economy has shifted toward services, and property tax remains the most stable tax across business cycles.
Phil Dean, senior researcher at the Gardner Institute, presented revenue and base‑composition charts showing three “legs” of Utah’s combined state and local tax system: property, sales, and income taxes. He said income taxes show the greatest volatility over business cycles, property tax is the most stable, and sales tax volatility sits between those two. Dean recommended policymakers consider those differences when setting budget choices (ongoing vs. one‑time spending) and rainy‑day reserves.
Maddie Oritz, senior public finance economist at the institute, explained efficiency tradeoffs: a broad base with low rates generally minimizes economic distortion; Utah’s sales tax base has declined from about 80% to roughly 60% of consumption over several decades as services have grown and many services remain untaxed; many exemptions and base narrowings have increased local sales‑tax rates in some jurisdictions.
The presenters said Utah’s tax mix has shifted toward income and sales taxes over the last three decades and noted that income taxes grew faster than sales taxes even after rate reductions. They also highlighted that property tax bills can rise in nominal terms even as the statutorily effective property tax rate declines when assessed values increase.
Committee members asked for cross‑state tax‑burden comparisons; presenters noted national data sources lag and pandemic recovery patterns temporarily skewed comparisons. The institute offered to provide state‑comparison tables and deeper dives into property‑tax measures on request.
The committee did not take action; presenters encouraged lawmakers to align revenue portfolio choices with budget‑risk tolerance and to consider how base structure and exemptions shape long‑term revenue sufficiency and fairness.
