SALT LAKE CITY (AP) - Two of the highest-ranking Utah state lawmakers urged caution Monday about a proposed income tax increase that would send an estimated $750 million annually to schools because they say it could hurt the state’s economy by scaring away companies.
A group called Education First is advocating for a ballot measure that would raise the income tax by 7/8th of one percent from the current rate of 5 percent to help boost per-pupil spending that is among the lowest in the nation. That current income tax rate was established a decade ago when then-Gov. Jon Huntsman pushed through several tax cuts.
Senate President Wayne Niederhauser and House Speaker Greg Hughes made their comments Monday at a conference sponsored by the Utah Taxpayers Association, a nonprofit that advocates for limiting taxes. Niederhauser and Hughes, both Republicans, said they’re open to trying to get education more money, but they don’t think raising the income tax is the best way to do it.
“Raising the income tax rate is the absolute worst thing that we could do because that’s a tax on productivity,” Niederhauser said. “When companies are relocating, one of the first things they look at is the income tax rate. And we’re not low in Utah. … Raising that rate puts us in a real challenge.”
Utah’s competition includes neighboring states, Nevada and Wyoming, which don’t tax income.
Education First co-chair Richard Kendell countered that companies are lured by top-level education systems, not low income taxes. He cited as examples California and New York. The group has the backing of several powerful business executives in the state, including Zions Banks President Scott Anderson.
“Our economy is going to be driven by talent. That is the new economy. The best workers. The most trained biologists. The best attorneys. The best accountants. The best entrepreneurs that can take new ideas and move them into the marketplace,” Kendell said. “Are we generating the talent that we need to drive Utah forward? I think not.”
He pointed to Utah having the lowest per-pupil K-12 education funding in the country, spending about $6,500 per student, according to U.S. Census Bureau data from 2014, the most recent year available. More than 27 states and the District of Columbia spent more than $10,000 per student.
Kendell said his group has done several polls that show the measure would be approved by the state’s voters because people approve of actions that send money directly to schools. They are aiming to get it on the ballot in 2018.
But state Sen. Howard Stephenson, a Republican who is also president of the Utah Taxpayers Association, said he doesn’t believe the measure can pass with voters. He said the recent presidential election showed that polls don’t accurately reflect when there is a “shame factor” for the person or measure in question.
Stephenson echoed Hughes and Niederhauser in recommending that lawmakers look to other ways to come up with more funding for schools. Among their ideas: restoring a food tax that could generate as much as $200 million annually; increasing the gas tax; and reducing some tax exemptions.
“The good news is that we have a lot of kids. The bad news is that we have a lot of kids,” Speaker of the House Greg Hughes quipped. “How we fund education is always a challenge.”
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