Thursday, March 12, 2015

Tax phobia in Utah hinders quality of life

Published in Standard Examiner, February 23, 2015, Ogden. Utah


The dictionary definition of phobia is “a persistent, irrational fear of a specific object, activity or situation that leads to a compelling desire to avoid it.” Tax phobia in Utah and elsewhere is squandering our country’s quality of life. We are falling behind other advanced nations in education, R&D, modern and advanced infrastructure and general well being.

Let us look at some of the facts about taxes in Utah. The data from the Institute on Taxation & Economic Policy, January 2013 (, shows a regressive tax structure in Utah. Overall tax burden in Utah falls as income rises if we count sales and excise taxes, property taxes and income taxes, with federal deduction offsets. For example, tax share of average family income, after federal deduction offsets, varies from 9.4 percent for $0 to $20,000 to 8.3 percent for $53,000 to $84,000. However, top 1 percent in the income distribution pays only 5 percent of their income in taxes. Rationality would dictate that Utahns should be willing to support higher taxes on rich.

The most regressive taxes are sales and excise taxes. However, Utah legislators have no hesitation increasing such taxes. For example, Sen. Kevin Tassell has proposed  SB160 that will increase the current state gasoline tax from 24.5 cents to 34.5 cents per gallon (40 percent increase) and diesel tax from 24.55 cents to 25.73 cents per gallon (5 percent increase). Since prices have decreased and Utahns are buying fuel-efficient cars, state legislators are concerned about falling tax revenue. Hence, a proposal is floating around to change per gallon flat tax to a percent tax, like a sales tax. It would be a highly regressive tax when there is inflation in gas prices, a double whammy to low income tax payers.

If gas prices increases to say $4 per gallon, a 13 percent gas tax, as it is now on the average price of $1.90 per gallon, would amount to a tax increase of 112 percent from the current flat tax of 24.5 cents per gallon. There are progressive ways to finance transportation infrastructure, such as state corporate tax increase above the flat rate of 5%, and/or an increase in severance tax on fracking and mining companies. Recently awakened concern among Republicans in Utah and Congressional Republicans about the economic plight of lower income people is heartening, but so far it has not resulted in any concrete actions beneficial to those groups.

Rep. Paul Ryan of Wisconsin has called President Obama’s tax proposal, that reduces income tax on lower income people and increases it on the rich, “envy economics”. Tax phobia and supply side economics took hold during President Reagan’s Administration. Taxes were decreased more for the rich than for lower income people. It was claimed that it would stimulate economic growth, benefit lower income Americans and reduce budget deficits. However, research has shown that none of the claims met expectations. The same argument is now being advanced by Congressional Republicans to counter President Obama’s tax proposal.

Politicians are not paying attention to the facts and wishes of Americans. Research by Levy Economics Institute, April 20, 2014,shows that relative disposable income (after taxes) of the top 10 percent to bottom 90 percent increased from close to 65 percent in 1986 to 90 percent in 2012. In addition, the wealthiest 10 percent gained 90 percent of the total wealth created during 1983-2010. Pew Research Center reports, May 22, 2013 (, that 57 percent of Americans in a survey are very much bothered that the wealthy are not paying their fair share of taxes; however less Republicans than Democrats and independents are bothered.

The Irony is Republican politicians, who now claim to be concerned about middle class and poor, are not paying attention to facts and Americans’ views on tax system. Assisted by ideologically driven media, they are too busy in fanning tax phobia and distrust of government in which they serve. Armed with misinformation and American exceptionalism, voters seek refuge in their ideology when voting for those politicians.

Research findings by Henrik Jacobsen Kleven, The Journal of Economic Perspective, Fall 2014, on attitudes on taxes, other social and cultural factors in Scandinavian countries relative to US, are instructive. He found that despite high tax to GDP ratio, Scandinavian countries, as opposed to US, have least tax avoidance and higher male and female employment rates, notwithstanding subsidies, for example, for child care, pre-school, elderly care etc. In addition, relative to US, they also have much higher trust among people, more charitable donations, voter turnout and more willingness to pay taxes to help poor since they don’t consider them lazy.

Factual information about tax burdens of various income groups, promotion of collective responsibility and trust, and crucial role of government for the wellbeing of all Americans, especially low income, would be a good start to conquer this phobia. Vince Lombardi once said, “ The challenge for every organization is to build a feeling of oneness…”

Mathur is former chair and professor of economics and now professor emeritus, Department of Economics, Cleveland State University, Cleveland, OH. This version was published on line at The print version excluded 8th paragraph.

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