The 2006 legislative session is thankfully over. (See here for an adequate report on the outcome). I must admit that I feel rather jaded because the legislature fell apart on one of my hot button issues: tax reform. A few days ago, Rep. Steve Urquhart sounded triumphal about finally cobbling together an agreement between the House and the Senate on tax reform (see here). But when push came to shove, politics won and taxpayers lost.
Although the legislators can say that they cut taxes, dabbling in some business tax cuts and achieving a hard-fought marginal tax cut on food items, the achievements are insignificant. Rep. Steve Urquhart blogged here about the earlier demise of an understanding between the House and Senate to completely scrap the sales tax on food. When the marginal decrease that finally passed goes into effect next year, we will have the confusing situation of paying slightly different tax rates on food items and non-food items.
I realize that the people that worked hard on this are happy to have gotten any decrease at all (perhaps seeing it as a foot-in-the-door achievement), but the ultimate impact on taxpayers is weird. Either the sales tax on food is good or it is not. Why tax food at a marginally lower rate than other items? If the tax is bad, get rid of it altogether. I realize that there are arguments against dropping the tax, but to only sort of drop it creates a strange situation.
My biggest beef is that even with the largest revenue surplus in state history, legislators were unable to figure out a way to enact meaningful income tax reform. I have blogged here, here, and here about this issue. Governor Huntsman is set to call the legislators back for a special session to work this out. It appears that the legislature managed to squander the time of the regular session focusing on things they deemed more important than tax reform. It’s not that they didn’t have sufficient time (see my post favoring a short session). They simply failed to use it effectively.
But seriously, the $65 million prospective tax cut they are talking about is only a small fraction of the overall surplus (around 7%). Although LaVarr Webb would call this a moderate tax cut (see here and here), it’s chickenfeed compared to what was available. It seems bizarre that legislators were unable to come to a consensus on returning even this nominal amount to the overcharged taxpayers. This really sticks in the craw of small government types.
So who were the big winners of this session? The biggest winner is the beast of the bureaucracy. We chose to feed the beast unprecedented amounts rather than having it go on a diet. Transportation is a big winner. Done properly, this can mean that all Utahns are winners as well. LaVarr Webb eloquently discussed this in his posts that I cited above (especially the first one). Education took the lion’s share of the surplus, garnering a 10.6% increase that includes a 6% increase to the Weighted Pupil Unit. The USTAR initiative passed, aiming to develop new technologies in Utah and then keep the resulting businesses here. We’ll have to see how it works in application.
And the losers? Being a believer in small government, I have to say that the taxpayers are the biggest losers. We have established a budget precedent that may come back to bite us when the size of the revenue stream inevitably diminishes. Since it seems impossible to put the bureaucracy on a starvation diet in lean times, overfeeding it in times of surplus instead of controlling its growth often translates into future tax increases. We’re also going to waste taxpayer money again to hold an early presidential primary in a vain attempt to get more respect for our state in national politics. The creationism crowd’s anti-evolution bill went to the junk heap.
Education is another loser. What, education?! I thought I just said it was a winner. Yes, it won a lot of funding, but it’s a loser—in two ways. First we are dumping more money into education without any significant reform (see my post about real education reform). As with all money-throwing efforts that fail to enact effective reform, we will ultimately get nothing of value (or worse) for our additional spending. Second, the public education industrial complex will still howl that it is yet hungry and has been inadequately fed. As it is presently constituted, we will *never* be able to satisfactorily fund public education. We will never have enough revenue to assuage the beast. There is no logical limit to the system’s perceived need. The only answer is very real, painful reform. We do not yet have the public or political will to pull that off, but the day that we do may be coming.
All in all, the results of this legislative session are mixed. Some good stuff, some bad stuff. I believe it is unconscionable that the legislature failed to achieve meaningful tax reform. I think it shows an inappropriate focus and bodes future problems. Still, I thank all of those that worked to make our representative form of government work, especially our elected officials. Some of you may have to face the ire of grassroots conservatives in the months ahead.