Utah’s state and local government tax and burden ranked higher than the nation’s during Fiscal Year (FY) 2019, 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 2019). 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.
Generally, tax burdens and government revenues as a percent of personal income increase during periods of economic growth as corporate profits, and capital gains increase 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 on fees to avoid tax increases. As a result, taxpayers end up paying more dollars for the same services.
As an example, Utah ranks 21st highest in taxes as expressed as a percentage of personal income. However, when fees are included, Utah ranks 7th highest, with 15.40% of personal income going to taxes and fees.
Returning to the argument that user fees are a sound method to fund government services, Utah’s motor fuel tax does rank higher than average. 0.38% of personal income in Utah went to paying the motor fuel tax, which is the major source to funding Utah’s expanding transportation infrastructure.
On the other hand, Utah’s individual income tax takes up 3.27% (9th highest) of personal income. Utah has seen tremendous growth in both its personal income and income tax revenue for several years. In fact, in comparison to all of our neighboring states, Utah ranks the worst for burden on individual income tax. Your Taxpayers Association is using this data as a key takeaway to strongly advocate for lowering the income tax rate for all taxpayers in the 2022 General Session.
Utah’s total tax and fee burden is 15.40% of total personal income, which is highest among neighboring states. Utah’s income tax also ranked highest among our neighbors, however, both Nevada and Wyoming do not levy an income tax.