Our View: Raise state's corporate tax
Thursday , May 29, 2014 - 10:46 AM
Utah can afford a modest raise to its corporate tax rate, which currently sits at 5 percent. In comparison to other states, that is on the lower end of the tax spectrum.
Despite its AAA bond rating, Utah has a debt problem. The debt is currently at $3.5 billion. That’s a dip from $3.8 billion a while back but it’s still way too high. According to Richard Ellis, Utah treasurer, that comes to more than $1,060 for each person. The state pays $500 million each year in interest. A key reason for the excess debt is that legislators went pretty heavy on bonds in the recent past.
We consulted with the Utah State Tax Commission on the impact of raising Utah’s corporate tax rate to 6 percent. The commission’s research shows a significant tax increase with the raise. “It is estimated that changing the corporate tax rate from 5 to 6% would result in a revenue increase of 25 percent annually (if applied to FY 2015 consensus forecast, this would result in an increase of $78 million in FY 2015),” Charlie Roberts, public information officer for the UTC. said in an email.
Roberts added that the analysis did not include any potential change in corporate behavior that may result from a tax increase. However, given that even a 6 percent state corporate tax rate compares favorably to a national average, we feel comfortable that doing business in Utah would remain attractive.
If Utah raises the corporate tax rate to 6 percent, our state coffers would be increased. Given that the current corporate tax rate is extremely low — and will still be low at 6 percent — that is the tax revenue source that should be tapped. Any discussion of gathering more tax revenues should focus on Utah’s corporate rate. Until that is addressed, it would be unjust to seek any increases in the gasoline tax or the food tax.
Corporations, as well as the businesspersons who run the corporations, have benefited from Utah’s economic strength, as well as its fiscal emphasis on education, particularly at its universities.
It’s both reasonable and fair for legislators to enact a small corporate tax increase as a way to raise more revenue.