December 15th, 2003
Re: Gov. Walker’s Proposed Budget
Contact: Mike Jerman, Vice President, 972-8814 (office), 808-8814 (cell)
Gov. Walker’s Budget Sets Stage For Huge Tax Increases in 2005

“Governor Walker’s proposed budget sets up her successor for a huge tax increase in 2005 and will force local governments to increase their taxes and fees. This is especially troubling in a state with the nation’s 9th highest state and local tax burden that is still dealing with the effects of a prolonged recession”, said Utah Taxpayers Association Vice President Mike Jerman.

The Governor’s earlier promise not to raise taxes was very misleading as her proposed budget creates a huge hole in the transportation budget that will have to be dealt with twelve months from now. The governor’s proposal diverts nearly $100 million in sales tax revenues from water and transportation in order to fund a hefty $122 million (6%) increase in the Minimum School Program. If implemented, this diversion will inevitably lead to a massive tax increase within 18 months.

“The governor’s budget is based on the assumption that state tax revenues will grow by 2.9%, a very optimistic projection that could lead to higher taxes if actual revenue growth is much lower”, Jerman said.

“The governor has made promises to the spending lobby that the legislature will not be able to keep without raising taxes”, Jerman said.

Proponents of the Governor’s plan to remove sales tax revenues from water and transportation argue that water and roads should be funded with user fees. User fees, however, are a form of taxation, and increased reliance on user fees should be accompanied by a reduction in the general taxes that are being supplanted by the user fees. User fees should be implemented where appropriate, such as transportation and water, but increased fees should not be used as an excuse to increase government spending. This is especially true in Utah where state and local sales tax burden is 38% higher than the national average.

Using dedicated sales tax dollars to subsidize transit, currently $110 million per year, seems to escape scrutiny while the Governor proposes to strip $83 million in sales tax revenue from roads and highways.

In addition, the governor’s proposal will require that small businesses file taxes on a quarterly basis which will result in a one-time increase in state revenues. “Small businesses and self-employed individuals have been hit very hard by this recession, and this is certainly a bad time to accelerate their income tax payments” Jerman added.

At her press conference today, the Governor stated that the state’s tax system is not structurally balanced to meet expenditures. “This is hard to believe since Utah’s state and local tax burden has increased from 17th highest in the nation in 1993 to 9th highest today” Jerman concluded.