Monday, April 07, 2008

Uncle Don Miller on Utah's Flat Tax

By Uncle Don Miller

The Salt Lake Tribune's recent story about Utahns being shaken by the new flat income tax relates to the crucial idea that the first step back to sanity is admitting our insanity. The insanity here is that virtually all Utah politicians embraced this flat tax scheme despite the fact that Utah was and is still dead last in public school per pupil spending, and when this $115 million tax cut was debated, a large majority of citizens wanted the money to be used to bolster public schools. Instead, political leaders opted to unfairly provide regressive Bush-like tax cuts of about $115 million designed to go almost exclusively this year to the wealthiest top 4 percent. The latter affront to social justice vis-a-vis tax fairness was obscured by much talk suggesting that the dual flat rate test might serve some beneficial purpose beyond just cutting taxes for the top 4 percent. It didn't.

The first step back to sanity is to publicly acknowledge how social justice is constantly eroded via the regressive unfairness of Utah's tax code. Remember, the Roman Empire crumbled internally when it accepted the fiction that flat income taxes are fair.

Don L. Miller

Flat-tax rate a big jump for many Utahns
By Sheena McFarland
The Salt Lake Tribune
Article Last Updated: 04/02/2008 01:27:40 AM MDT

When Claire Geddes prepared her taxes, she was taken aback at the amount she'd have to pay using this year's new flat-tax system.

Instead of owing $400, she would have had to pay $1,700 to the state.

"It was pretty startling," said Geddes, 61, who lives in Cottonwood Heights with her husband on a fixed income from Social Security and her husband's pension. "Having them do that to seniors is horrendous. I don't know how they expect people to get along."

Geddes, like other Utahns, faces a choice this year. She can go with the new flat tax or stick with the old version. All but a small number of taxpayers would pay more under the flat-tax option. But none of the policy makers responsible for the change or those administering it have done much to advise the public of that.

The dual-track system was developed in 2006 as a stepping stone toward everyone paying a flat tax, but was heavily criticized by many. Next year, all Utahns will pay a flat tax of 5 percent with a few credits for mortgage payments or charitable donations among others.

But for this year, the Utah Tax Commission recognizes most taxpayers could pay significantly more using the flat tax. However, they never issued any warning letting Utahns know that.

"We didn't do anything along those lines because we just collect the taxes and distribute them," said Charlie Roberts, tax commission spokesman.

Lisa Roskelley, spokeswoman for Gov. Jon Huntsman Jr., said no state agency alerted taxpayers they would pay more under the flat tax.

"It's not fair to say they will be [negatively affected]. They could say, 'I would rather pay more taxes,' and choose the flat tax this year," she said. "The reason it's optional is they can choose which is best for them."

Phil Dean, a policy analyst at the Office of Legislative Research and General Counsel, pointed to two briefing papers detailing the dual system this year. He also provided a fact sheet, but it never warned taxpayers they likely would pay more with this year's flat tax. Those reports are available online at, but are not widely distributed.

"This year, we estimate about 4 percent of people will benefit from the flat tax, but next year it should be 90 percent of people," he said, adding those benefiting most would be in higher-income levels.

Those filing this year must pay only the lesser of the two amounts. Tax commission leaders assure Utahns that next year's system will not see such dramatic increases.

"We're telling folks not to compare their returns because they don't know what type of deductions and credits they'll get next year," Roberts said.
Most people will get a taxpayer tax credit or a retiree tax credit among others, he said.

However, that doesn't stop people from having to fork over more money this year if they choose to use the new flat-rate system.

"I haven't done one of the 210 tax returns I've prepared that would have been better off this year using the new system," said Vearl Jensen, a tax preparer in Midvale.

He also said the tax preparation software he used was not up-to-date and was producing incorrect numbers. Other programs, such as TurboTax, use the old bracketed system. Anyone preparing their own taxes should double-check their state returns if numbers look significantly different from past years.

But even with the concerns this year, he is happier about next year's numbers that he figured out using an online tax calculator.

"When I run it through the calculator, it's only off by about $20 one way or the other," he said.

Geddes, who worked for government watchdog group Utah Legislative Watch among others, is happy she calculated her taxes under both systems before filing. But she's frustrated the flat-tax calculation was so high. She's talked with several retired friends who faced the same jump if they used this year's new system.

"When you take advantage of the most vulnerable part of society by tripling taxes to give [the rich] a break, it's offensive," she said.


Anonymous said...

The Roman Empire fell for a lot of reasons, but the flat tax was not one of them. The Romans could not indefinitely maintain their vast perimeter that was bound to be invaded someday. They were overextended. It was only a matter of time before something tipped the balance.

The Huns arrived in eastern Europe in 370 AD from the East. No evidence exists to suggest that the Huns arrived because the Romans imposed a flat tax.

Fearing for their lives, the Goths invaded the Roman Empire, seeking safety from the even more barbaric Huns. They were soon followed by other Germanic tribes such as the Vandals, Suevi, Visigoths, Alemanni, Marcomanni, Franks, Burgundians, Saxons, and so on. No evidence exists to suggest that the great Germanic invasions were motivated by flat taxes.

Within one hundred years (476 AD), the western portion of the Empire was gone.

Jesse Harris said...

... Utah was and is still dead last in public school per pupil spending...

The minute we start determining the success of our education system by how much money we're spending relative to other states, we're doing it wrong. Countries like Japan, Sweden and Singapore underspend and outperform Utah on a consistent basis. Maybe we should figure out what they're doing and try to emulate it rather than marching down the same path as all other states.

Anonymous said...

Jesse is correct.

The typical counter-response is "but those countries don't educate everyone like we do" or "the test scores in Singapore, Sweden and elsewhere only include college-bound".

Both counter-claims are false. The U.S. is not the only country with universal education. The rest of the developed world has universal education also. Besides, it's hard to claim that the U.S. educates "everyone" when our graduation rate is 70% to 80%.

The TIMSS and PISA international comparisons are statistically reliable comparisons between participating countries. Defenders of the U.S. status quo are wrong when the claim that TIMSS and PISA comparisons include all U.S. students but only elite students in other countries.

Anonymous said...

Germanic invasions, precipitated by the arrival of the Huns, were obviously the major factor in the fall of the Roman Empire.

Not surprisingly, there were several reasons why the Roman Empire collapsed. There was certainly a tax angle, but not necessarily a FLAT tax angle.

Wikipedia has some good summaries of the major theories for the collapse of the empire. While taxes are frequently mentioned, the tax-related reasons are typically overtaxation and inefficient taxation, not flat taxes.

Anonymous said...

Don't forget that the flat tax option is for one year only.

Next year, the only system will be a SINGLE rate with credits that phase out as income increases therefore maintaining progressivity within the Utah individual income tax system.

Anonymous said...

Too many people, like Don, are confusing this year's flat tax option with next year's single rate system. They are not the same.

Anonymous said...

The flat tax is great..I payless in taxes !!!!!