Utah 2.0 helps establish a stronger economic climate for business, and better ensures the competitiveness of Utah heading into the future.
Over the past year, your Utah Taxpayers Association has been meeting with legislators, business leaders, and other policy officials to unveil a new initiative aimed at bringing Utah back to the forefront in economic development and creating a fairer tax policy.
We’ve all been bombarded with studies showing Utah as a great place to do business, but is that actually the case as we open 2016?
Sure, Utah is better than some other states, but we’re beginning to lose our edge.
Enter Utah 2.0.
Utah 2.0 is a three-pronged approach to catching Utah up to surrounding states, and then adding an even more competitive edge for businesses to relocate and continue to expand in our communities.
Keeping Utah 2.0 is about creating a strong economic climate for businesses that have a local presence to grow, expand, and to continue being more attractive for businesses looking to move here.
These three proposals are as follows:
- Create equity in tax code by allowing a sales tax exemption for all manufacturing inputs, rather than inputs that have a life greater than 3 years,
- Allow all industries to calculate the corporate franchise (income) tax using a single sales factor,
- Ensure Utah is prepared with a proper and necessary workforce for the 21st Century.
Let’s begin by taking a look at the first item, a sales tax exemption for all manufacturing inputs, or the three-year life sales tax penalty.
Back in 1995, a bill strongly backed by your Taxpayers Association created a sales tax exemption for manufacturing inputs (stuff used to create and build other stuff). However, it was only allowed for those inputs that last for more than three years. In the years following that, Utah’s manufacturing gross domestic product (GDP) grew faster and stronger than surrounding states, and much more than it had in years past.
The 1995 legislation was a good start in making Utah more attractive to manufacturing businesses, and it had a direct correlation in economic development in the state.
However, the Utah Legislature needs to finish the job. From a tax policy standpoint, this is an entirely unfair solution to some companies, by creating a sales tax penalty for some businesses, while excluding others.
Take the hypothetical example of two companies (competitors) that produce an identical output of drive shafts for vehicles.
Company A has a singular, 8-hour shift. Company B has two shifts, with the employees and equipment running twice as long.
Company B, while making the exact same drive shaft as Company A, will go through its equipment and inputs two times faster, but are producing more. Why do we have policies to punish businesses who are producing more, higher-valued outputs?
Our second initiative is to make Utah’s corporate income tax more competitive by allowing all industries the opportunity to elect for a single sales factor. Bear with us, this one takes a bit of an explanation, but it’ll be well worth it.
As it stands now in Utah code, some industries corporate income is calculated based on three factors: property, payroll (employees), and sales in Utah.
Right now, some industries are allowed the option to calculate their corporate income tax based only on the sales made within the state. However, this does not apply to everyone.
Just like the manufacturing input exemption, some are excluded, including mining, and informational systems (IT), and finance. It’s this inequity in the tax code that needs to be addressed immediately.
Utah has always been a leader in creating sound economic policy that businesses and organizations of all sizes flock to. But as other states learn from Utah’s example by providing single sales factor for all industries, including California, Colorado, and Texas, Utah looks less and less attractive to businesses.
Third, Utah needs to ensure that we have the properly trained workforce to continue attracting businesses that have jobs ready to be filled.
Some estimates have placed the number of unfilled STEM jobs in Utah at 10,000.
In a legislative policy summit held late in 2015, a University of Utah professor gave a presentation on investing in Utah’s workforce, and how that ties to increasing economic outputs and gross domestic product. (If you’d like to read more, read this month’s My Corner on page 2).
In order to keep our current students employed and to keep Utah as a strong state to do business, it is vital for students to understand the earned income potential for degrees and the workforce need in the state to help them make more informed occupational and educational decisions.
There you have it, Utah 2.0. Pretty cool. This initiative takes an all-encompassing look at the issues facing Utah businesses and individuals today, found the solutions, and will push Utah back to being a fair, strong business climate and continue to outpace all other states in nation when it comes to economic and job growth.
Would you like to learn more or get involved in our Utah 2.0 initiative? Give us a call or email [email protected] for more information.
To learn more about Utah 2.0, check out January’s edition of the Utah Taxpayer.