Gardner Policy Institute tells Utah committee that tax complexity drives large administrative and compliance costs
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Summary
Researchers told the Revenue and Taxation Interim Committee that growing complexity in income, sales and property taxes increases time and out‑of‑pocket costs for taxpayers and adds administrative burden for the Tax Commission—citing about 60 income‑tax credits (~$460M foregone) and roughly 60 sales‑tax exemptions (~$95M state sales‑tax impact).
Phil Dean, chief economist at the Kim C. Gardner Policy Institute, told the Revenue and Taxation Interim Committee on Nov. 19 that tax design choices carry compliance and administrative costs that are distinct from the dollar value of a tax. "When you design tax policy ... it's always important to keep the ability to actually administer and comply with the tax code," Dean said.
Dean and senior public finance economist Maddie Orette presented examples of how complexity accumulates: Orette said Utah tax code had "about 60, a little bit over 60, total income tax distinct income tax credits" claimed in tax year 2023, which the presenters estimated corresponded to roughly $460,000,000 of foregone income‑tax revenue. They also noted roughly 60 state sales‑tax exemptions; the Tax Commission estimated a 2024 state sales‑tax revenue impact of around $95,000,000 from those exemptions.
The researchers described two channels of burden: time spent by individuals and businesses complying (paperwork hours and professional assistance) and direct outlays (tax‑preparation software or accountants). Dean cited national paperwork‑hour estimates to place the scale of compliance obligations in context.
Orette highlighted administrative complications from the proliferation of sales‑tax jurisdictions and differing local tax bases. She said Utah had about 321 sales‑tax jurisdictions in a 2020 Tax Foundation dataset, and pointed to a recent rise in the number of local sales‑tax and development authorities that create "tax islands" sellers must identify when sourcing transactions.
Both presenters emphasized trade‑offs: many credits and exemptions respond to policy goals (housing, business incentives, local relief), and simplification creates winners and losers. The report also noted federal compliance gaps—an IRS estimate of a federal tax gap on the order of hundreds of billions—which presenters used to illustrate that enforcement and compliance investment can recover revenue.
Committee members asked follow‑up questions about population projections and property‑tax measures; Orette and Dean said the institute will provide full reports and follow‑up answers on specific data requests. The institute distributed reports and said staff remain available for committee questions.
