For years, county assessors have been conducting personal property tax audits in a way that is becoming a significant burden to small business owners. Many businesses have shared stories of county auditors coming into their business and auditing personal property for two or three days, only to end up issuing a $30 bill for additional property taxes owed. Clearly, this is a waste of time and resources for both business owners and county auditors, and is a practice that should be stopped. To curb nonsensical county audits, retiring State Representative Jim Nielsen has proposed changing the value at which business personal property can be taxed.
Currently, the state of Utah allows businesses an aggregate $10,000 exemption for business personal property and only taxes property above that threshold. After visiting with various stakeholders, Rep. Nielsen proposed a $3,000 per item threshold to the November Business and Labor Interim Committee.
This proposal, however, would require amending Utah’s Constitution. The legislature by a 2/3 vote of each House would first have to place a constitutional amendment on the ballot (for voter approval) that would compromise the equal protection clause of the Utah Constitution. This could also potentially run afoul of the US Constitution. This would be a disastrous move by lawmakers. In effect, it would allow lawmakers the ability to prefer some types of personal property to others, and create a system of winners and losers in business personal property taxes.
In Arizona, where there are no equal protections for owners of personal property, dozens of different personal property tax rates exist, ranging from 1% on certain items to 38% on others. This is not the kind of tax environment we want in Utah. We can have a better tax system.
Preventing imprudent audits doesn’t require amending the Utah Constitution. Your Taxpayers Association calls on state lawmakers to direct the State Tax Commission to handle this problem internally. The Tax Commission administers and supervises all tax law within the state of Utah. It is appropriate for the Commission to come up with a county audit program that is cost effective and less burdensome to Utah businesses. Under such a program it could be ensured that county audits are fair and efficient.
It is tempting to run to the legislature and rewrite laws every time problems are discovered in the way government interacts with business. But this is an issue that can be fixed without any legislative changes, thus preserving our state’s constitution and sound personal property tax policy.