Utah called a tax-heavy state- Burden is hindering economic growth, Ohio professor says

Utah is an unfriendly state when it comes to earning an income, accumulating wealth or operating a business, according to one well-known
economist.

By Dave Anderton
Deseret News business writer

In fact, Richard Vedder, a professor of economics at Ohio University who has advised several political leaders including Russian President
Vladimir Putin, maintains Utah’s tax structure is burdensome and ranks poorly when compared to neighboring states, especially Nevada and
Wyoming.

"And this is in a state that has been controlled by the Republican Party for many, many years. I wonder what would happen if the
Democrats came in," Vedder quipped Friday during a presentation to the Utah Taxpayers Association.
Vedder told the tax watchdog group that Utah’s high aggregate state and local tax burden is preventing the state from greater economic
growth.

According to a 1999 study by Vedder, Utah ranked ninth in the nation in terms of total state taxes as a percentage of personal income.
And while economic growth in the state has exceeded the national average in recent years, Vedder attributed the divergence to a
well-educated work force and intact families, leading to less welfare costs.
"Still, taxes matter," Vedder said. "And your growth would have been even greater had you moderated your tax burden more."
One of Utah’s problems are that its taxes are too high, he said.

"You have very high income taxes in this state, and the income tax is probably the most destructive of the major taxes," Vedder said.
"Your sales taxes are moderately high. Property taxes are also pretty high in this state."
Vedder noted that Utah’s high tax rates may be somewhat related to unusual
trends, most notably Utah’s high fertility rates and population growth. However, Vedder
said other states experiencing high population growth — Florida, Texas, Nevada and
Arizona — managed to maintain low taxes.

Howard Stephenson, president of the Utah Taxpayers Association and a state
senator, said more-reasonable taxes in Utah would generate more growth.
Utah’s top income tax bracket is 7 percent, Stephenson said, adding that steps
should be made to index the income tax for inflation.

"That boosts our taxes $4 million to $5 million a year. Over the years, that has
made us uncompetitive," Stephenson said after Vedder’s remarks.
In addition, Utah should remove the sales tax from items that are consumed in the
manufacturing process, he said.

"Those are taxes on inputs. Whenever we tax inputs, we stifle outputs,"
Stephenson said.
Vedder noted per capita income in 1957 in Colorado was 14 percent higher than
the Beehive State. Today, Colorado’s per capita income is more than 34 percent higher
than Utah.

"Typically, over time, income differentials between states narrow as capital
migrates into the lower-wage areas. But that did not happen to you," Vedder said.
Vedder attributed Colorado’s secret to almost no tax increases from 1957 to 1997.

Whereas in 1957, Colorado’s tax burden was higher than Utah’s, 40 years later it averaged 13 percent lower.
"By constitutionally constraining governmental growth, the people of Colorado have prospered mightily," he said.
Vedder also blasted the nation’s public education system, saying that public schools were patterned after "the old Soviet model," mirroring
government monopolies that produced a shoddy product where teaching centered on "fads" instead of facts.

"I teach the same number of students Socrates did 2,400 years ago. I know of no other profession . . . that has absolutely had no
productivity advance in 2,400 years."

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