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Thursday, February 23, 2006

Surplus 101

By Senator David L. Thomas
District 18

Senator Greg Bell
District 22

Senator Michael Waddoups
District 6

Senator Tom Hatch
District 28

What to do with the record surplus is the ongoing question on Utah's Capitol Hill. Unfortunately, rhetoric rather than facts seems to rule the day.

So let's talk facts.

While everyone talks about a $1 Billion surplus, there is really about $641 million in ongoing funds B $264.5 million from the General Fund and another $376.3 million from the restricted Uniform School Fund (another $570 million is in one-time monies which cannot be used to fund ongoing programs or tax cuts).

Out of that surplus, we have to fund the following areas:
* Non-discretionary funding increases such as K-12 student growth: $ 61,088,000

* Increased health insurance premiums for state employees: 15,800,000

* Retirement funding for state employees & public education: 18,300,000

* Other actuarially required payments: 32,700,000
We also need to consider the further needs of the State:
* Medicaid growth, not to increase benefits, but to just keep up with the increased population (we are the 5th fastest growing State in the nation): $54,800,000

* Correctional and Public Safety facilities costs. Without these there will potentially be an early release of felons into our communities: $12,100,000

* USTAR, the Governor's flagship for economic development: $15,000,000

* Increase in per pupil spending for public education and a cost of living / benefits increase for State workers: $167,800,000
TOTAL: $377,588,000

In addition, there is another $185 million in other legitimate needs, prioritized by the Legislature and requested by the Governor, ranging from sorely needed improvements in public education to paying the gas bill at colleges and universities to a sex offender registry and prosecution costs of child pornography.

So the question for those who favor taking the sales tax off of food - which would cost $168 million from the General Fund surplus – is this: which one of these many needs do you want to cut? Should we not take care of our poor and elderly? Should we allow an early release of criminals into our communities? Who will tell our teachers that they do not deserve a Cost-of-Living adjustment? Should we increase tuition at our colleges and universities to pay for increased fuel costs?

By the way, we have yet to even address the $16.5 billion price tag on fixing our highways. Should we do nothing and increase waiting time on I-15 in Utah, Weber, Davis, and Washington counties?

If we fund these needs, the sales tax on food will remain. Is that a bad idea? The fact is that sales tax is the fairest tax we have - everyone participates and contributes to paying the costs of government services. It is also essential to a stable tax base, as any CPA will tell you. Those states who took the sales tax off of food generally have lower bond ratings than those who didn't. What does that mean? It means that those states without sales tax on food generally pay higher interest rates - in sum, they pay more money for interest costs at the expense of other needs like education and transportation. According to the latest polling data, most Utah citizens (58%) want these needs funded more than they want to take off the sales tax on food.

A comment on the Governor’s original flat tax reform proposal is also in order. Under that proposal, the cost was approximately $30 million. It was not, however, as has been reported, a tax cut proposal. It was a tax shifting measure. Unfortunately, that proposal would have shifted more taxes onto the middle class. For example, a married family of four that made 55K with an average mortgage and itemized deductions for charitable giving would have incurred a tax increase of $109 per year. A married family of four making 75K per year with the same deductions would have seen a $534 per year tax increase. Hardly the $10 to $15 shift that has been asserted. It is with this background that the Senate has asserted that there should not be winners and losers in tax reform, especially when we have a surplus.

Senator Bramble unveiled a modified version of the Governor’s flat tax proposal on Wednesday of this week that seems to make sense. The numbers balance almost every Utah citizen will have a tax cut. The caucus approved the plan and it will probably be considered in Senate Chambers on Thursday.

The Utah Senate has taken a reasoned position to cut the individual income tax by $100 million, the largest tax cut in Utah history, which can come out of both the General and Uniform School Funds. We can return part of the surplus to all the citizens, while maintaining sufficient funds to address the needs of the State - the poor, education, and transportation needs - without growing government.

That is responsible government.

Feel good proposals are great rhetoric, but they don't pay the bills.


Anonymous Demosthenes said...

Thank you for that outstanding explanation of the current tax proposals and debate. It is comforting to know that there are legislators who put the needs of the state before personal interests. Best wishes and good luck.

2/24/2006 8:47 AM  
Blogger Daniel said...

You say that "sales tax is the fairest tax we have". Can you define "fair"? It appears that your definition is that everyone participates. Other organizations use a very different definition -- defining "fair" as having everyone pay an equal amount of their income, so that the poor pay the same percent of tax, bsaed on income, as the wealthy.

Can you explain why you might disagree with this latter definition of "fair"?

2/25/2006 9:36 AM  
Blogger Daniel said...

My second question ... I might agree that a sales tax is a good way to fund government. It does provide stable revenue and I can control how much I am taxed by how much I consume. However, with regard to food sales tax in particular, we all have to buy some food to survive. I cannot cut my tax by reducing my consumption because at some level we all need to eat.

Consider someone who is poor enough that she may spend nearly all her income on food, just to survive. If the sales tax is 6.6%,that person ends up paying 6.6% on her entire income. If the Senate had its way and reduced income taxes but left the sales tax alone, that person would in effect be paying a much higher percentage of her income as taxes when compared to someone who is better off.

To many this would seem unfair, and they view a food tax as a burden. Can you explain your thoughts on this subject?

2/25/2006 9:44 AM  

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