The United States and the State of Utah have an inflation problem. According to the most recent estimate put out by the Bureau of Labor Statistics, prices in the U.S. are rising at a 7.9% annual clip. If one pivots to just the Mountain West, prices are rising at a 9% pace (Joint Economic Committee of Congress). The problem is everywhere, from food (+7%) and energy (+29%) to transportation (+22%).
What can lawmakers and the Governor do to address the issue? By and large, most of the drivers behind the problem are outside of our elected officials’ purview. But, is there something they can do? The answer is yes.
Two easy actions come to mind. The first is to put an end to the freeze on the state basic levy rate on property taxes. The second is postponing the slated gas tax rate increase scheduled to take effect on January 1, 2023.
On the first – ending the freezing of the rate on the state property tax levy, in the 2018 General Session (HB 293), policymakers opted to freeze the basic property tax rate. The freeze has generated lots of revenue, and, unless action is taken soon, will end up generating more than $350 million compared to $125 million that was budgeted.
At the time, the fiscal note assumed 6% growth in property values. This year, property values will likely come in up 25% or more (in Salt Lake and Davis counties, the numbers we’ve heard surpass 30%). That’s a 25% increase in property tax from the basic rate portion. Imagine telling a constituent that you were well aware of how much their property taxes would go up several months ahead of time and you did nothing. That is exactly what the Utah Senate did.
Taxpayers should be aware that a bill to fix this very issue passed the House of Representatives near the end of the session in 2022. HB 478 run by Representative Brad Last overwhelmingly passed the house with a vote of 56-13-6. When the bill was moved over to the Senate there was no action taken and the bill died.
At a time when inflation is so high, and state/school district budgets are quite healthy, now is the right time to forgo the remaining property tax increase for the final year of the freeze. It would help taxpayers with inflation relief and property tax relief.
The second suggestion stems from HB 362 of the 2015 General Session, which indexed the gas tax to the price at “the rack”- essentially the wholesale price of gas. The gas tax rate has steadily increased since passage of the bill, currently sitting at 32 cents per gallon. With the skyrocketing gas prices 2022 has brought us, if the price of gas remains this high and policymakers do nothing, the tax rate could rise much more than expected on January 1, 2023, and then again in 2024 and beyond, and in short order potentially the current maximum rate of 40 cents per gallon – further exasperating an already hot inflation picture.
Neither of these two tax increases is fully accounted for in the state budget, and the already healthy state and school budgets would be just fine doing without tax increases for the moment. We’d recommend legislators do the right thing for Utah taxpayers who are dealing with inflation, and postpone these specific tax increases immediately.