Utah’s state and local government tax and burden ranked 30th highest in the U.S. and below the national average during Fiscal Year (FY) 2017, according to the Utah Taxpayers Association’s annual calculations in the How Utah Compares report. Tax burden is expressed as the percentage of total personal income (FY 2019) consumed by state and local taxes (FY 2017). Data is sourced from the U.S. Census Bureau’s Census of State and Local Government Finances and personal income data from the Bureau of Economic Analysis are used to calculate the burden of various taxes in all fifty states.

Two of the major taxes examined in this report (individual income and property) decreased in tax burden, while two (sales and motor fuel) increase in overall tax burden from the prior year. Overall, Utahns tax and fee burden (excluding higher education costs) decreased 0.26% from FY 2016.   

Generally, tax burdens and government revenues as a percent of personal income increase during periods of economic growth as corporate profits, and capital gains increases faster than total personal income. During a recession, tax revenues decrease faster than total personal income. During the Great Recession, the Utah Legislature adapted to lower tax revenues and relied on an influx of federal revenues to fund programs.

While user fees are frequently a sound method to fund government, government can simply increase reliance of fees to avoid tax increases. As a result, taxpayers end up paying more dollars for the same services.

As a part of that, the state and local taxes and fee burden has increased, but state and local taxes have decreased in Utah. As we have seen, particularly with local entities seeking to raise revenue, they refuse to raise property taxes through Truth in Taxation because they perceive it to be difficult. They often choose to raise fees instead to fund government services, which is less transparent.  

Utah’s total tax and fee burden of 13.38% of total personal income, which is highest among neighboring states. Utah’s income tax also ranked highest among states, however, both Nevada and Wyoming do not levy an income tax. The extraordinarily high income tax ranking can be attributed to exponential income tax growth, and leads the argument for additional income tax cuts, following the 4.66% income tax rate which will be enacted in 2020.

To view the entire How Utah Compares, click here.