Heard this one before?
“Income-tax cut urged, Huntsman says it would benefit schools, but educators are wary,” is a headline in this morning’s Deseret Morning News in Salt Lake City.
Gov. Jon Huntsman, Jr., wants a cut in the state income tax. Education funding shrank a great deal as a priority in Utah in the past decade, and educators want to make up lost ground — much of the state income tax goes to support education. The article is by Deseret News reporter Jennifer Toomer-Cook.
Cutting income taxes — the major source of money for schools — would grow the economy and ultimately bring more money to education, Gov. Jon Huntsman Jr. told the State School Board Thursday. But the board wants assurance that proceeds from such a plan would actually go to public schools — a promise the governor was not yet willing to extend.
Huntsman said he approached the State Board of Education to discuss money for schools, which he called a “most pressing concern.” Utah spends less per student than any other state, despite a 10 percent spending boost last Legislature.
Utah’s economy is humming, with increases in job growth and personal income, Huntsman said.
One of the key issues lawmakers need to look at is just what attracts new business. Utah has benefited greatly from the California Exodus. Utah also benefited from having a highly-educated populace generally, and having a couple of very large universities in sizable cities where an outdoor lifestyle involving skiing and warm-weather mountain sports attracted high technology businesses who wanted well educated workers. Growth in Utah Valley can be attributed in no small part to the presence of the nation’s largest private universty, Brigham Young (especially with the decline and fall of the local steel mill); research at the University of Utah historically attracts business and development.
What is more important to a company: An educated workforce, locally supplied, or a low personal tax rate? Gov. Huntsman’s view may be accurate — the company decision makers think personally about the tax rates. But there is contrary experience, too. When he was governor of Tennessee, Lamar Alexander had two initiatives to attract business, “Good Roads” and “Good Schools.” Especially the automakers who built plants in Tennessee said they wanted an educated workforce, and they needed the roads to get goods to market.
Utah lawmakers faced a budget surplus of $1 billion in the last session. Tax cuts may be warranted. Long-term observers — I’ve been watching Utah for 40 years — note that surpluses have a tendency to turn to deficits very quickly. Surpluses should be treated like the gold they almost literally are.
Utah legislators last year approved a $70 million cut in the sales tax on food. “Another $70 million remains on the table for income tax reform” the article reports. Novel reform is also discussed, including a dual-tax system that would allow some taxpayers to choose to pay a flat tax rather than the current graduated system.
“A stronger economy strengthens education funding,” said Robert Spendlove, the governor’s chief economist. “In other words, a rising tide raises all boats.”
Spendlove said research shows high taxes hinder states from attracting new jobs and can encourage executives to pick up and leave, causing tax revenue losses. Utah’s income taxes are fourth highest in the Western region, an area where a handful of states, including Nevada, have no income tax at all. Some states nationwide are cutting tax rates to attract and retain businesses in order to grow their economies, including Arizona, Rhode Island and Oklahoma.
The effect would be to attract new businesses to set up shop here, generating tax money for schools, Huntsman said.
If low taxes were the great attractor, why isn’t New Hampshire an industrial powerhouse? Determining where the threshhold is for taxes that are “too high” to attract business is much less science than some economists might let on. Taxes are low in Haiti, too. One might suspect this is a too-simplified explanation.
Board chairman Kim Burningham said he agrees with the proposal’s general philosophy.
“But the question is assurance. How do I know if there is improved income in the future it will go to some educational needs? I’ve got to have some assurance in order to feel comfortable,” Burningham said. “I wish you as governor would advocate some assurance, because I believe in your heart you would like to see that.”
Both public schools and colleges get income tax money. And the Legislature recently has been paying more and more of colleges’ budget out of the income tax, essentially leaving less of the pie for public schools.
Burningham is a former public school teacher, and has been active in government as a legislator and education reformer for most of the last three decades. A side benefit of having had a great educational system in the past is that current government ranks have many highly-educated, and well-educated people in positions of power.
Gov. Huntsman is sponsoring an “education summit” sometime this fall, looking for solutions to education problems. Private schools educate a smaller portion of the elementary and secondary population than in other states, as a result of the strong public education drive of early pioneers, and as a result of the emphasis the Latter-day Saints church puts on education — LDS being a dominant sect in Utah. Utah has the everywhere-in-the-US problem of too few qualified math and science teachers.
Utah’s Gov. Huntsman says he will visit all 40 of Utah’s school districts in a search for solutions. Other governors might be envious. Texas Gov. Rick Perry would have a difficult time visiting all 254 Texas counties, let alone the dozens more school districts.