UTAH’S BUSINESS CLIMATE: THE FOUNDATION OF OUR SUCCESS
Utah is consistently recognized as one of the nation’s most diverse and highest-performing economies. The state’s business climate is the foundation of our prosperity, and in order for Utah to remain strong in this time of growth, legislators must reevaluate and modernize policies that are critical to the business community’s long-term success. It’s time to advance a bold, action-oriented strategy that will modernize our tax code, develop our workforce and improve economic development.
“Through the years, policymakers have been successful in helping to create the flourishing business climate Utahns enjoy today. However, as Utah continues to grow and evolve, so must our tax policies and incentives programs.”
Steve Starks, Larry H. Miller Sports and Entertainment
THE CASE FOR TAX MODERNIZATION
A modern economy has left Utah’s tax code behind and, with it, the flexibility to make strategic decisions about our state’s future. We must implement an updated, balanced approach to tax policy that can provide a strong path forward for our state’s economic vitality. Now is the time to broaden the base and lower the rate.
THE NEED FOR A BALANCED APPROACH
Our economy and population have changed dramatically since the 1980’s, but our tax system has not. Utah’s budget is comprised of three main revenue sources: property tax, income tax and sales tax. Sales tax, the most flexible revenue source to meet our state’s changing needs, currently accounts for 88 cents of every dollar in the Utah’s general fund. However, with taxable sales as a percent of the economy shrinking, critical budget decisions will be an increasing challenge. Actions to create balance between revenue sources will provide a stable foundation for our economy to thrive.
RISE OF THE SERVICE ECONOMY
Over the last several decades, the number of businesses in the service sector of our economy has grown at an incredible rate. Whether it is the subscription app on your phone, the rideshare you take around town or the haircut you get, services today make up a larger share of Utahns purchases than ever before, creating an erosion of the state’s sales tax base. Over time, a declining tax base creates a complex and inefficient budgeting process that dismantles the state’s fiscal stability. If we continue to delay tax reform, it will only get more difficult.
While Utah’s average combined state and local sales tax rate is in the bottom third of western states, our total tax burden is already relatively high compared to our neighboring states.
RAISING THE SALES TAX RATE IS NOT THE ANSWER
While raising the sales tax rate may appear to address Utah’s imbalanced tax structure, it is not the right solution for our long-term economic stability.
A higher tax rate:
- Is a short-term fix to an increasingly complex problem
- Has the potential to diminish Utah’s economic competitiveness
- Impacts individual Utahns’ quality of life and disproportionately burdens low-income earners
Economic Development & Incentives
Since 2008, state leaders have been focused on attracting and recruiting companies and incentivizing business growth across Utah. The dedication to achieving this increased economic development has proven successful, evidenced by the outcomes of the Economic Development Tax Increment Financing (EDTIF) program.
THE EDTIF PROGRAM HAS HELPED
RAISING THE BAR ON INCENTIVES
The EDTIF program, coupled with a thriving business climate, has put Utah on the map as one of the country’s best states for business. Tax incentives have been, and will always be, an important factor in the site selection process, but as Utah continues to grow, these incentives should move toward solving problems and encouraging positive outcomes for our communities and the people of Utah. It is time to modernize our tax incentives program to focus on attracting future-oriented firms and export-centered businesses. Incentive programs should assist existing businesses to grow into global headquarters and stimulate investment into workforce development and talent attraction.
FUNDAMENTALS OF OUR ECONOMIC SUCCESS
Building Rural Utah
RURAL ECONOMIC DEVELOPMENT INCENTIVE PROGRAMS
In 2017, Governor Herbert challenged Utah businesses to create 25,000 new jobs in rural Utah by 2020. This initiative recognizes that the economic prosperity experienced along the Wasatch Front is not reaching all Utah communities. To address this, the Governor’s Office Economic Development houses eight incentive programs to foster job creation and capital investment in rural communities.
Of the 8 rural incentive programs:
- 5 address job creation*
- 4 address capital investment*
- 1 addresses community economic development activities
*Three of these programs address both job creation and capital investment.
MORE EFFICIENCY = MORE IMPACT
Collective impact thinking and framework for Utah’s rural incentive programs will help to streamline efforts and provide more value for rural businesses.
SHOVEL-READY SITE DEVELOPMENT
In rural Utah, challenges with job creation and capital investment are connected to the high cost of infrastructure. This is true for both out-of-state companies and community businesses. Providing newly-constructed or modified facilities for immediate business expansion or attraction will empower rural communities to pursue a greater number of economic development opportunities.