An embarrassment of riches

Deseret Morning News editorial
Published: Monday, Dec. 18, 2006 8:18 p.m. MST
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With Utah's economy rolling at possibly the highest speed on record, taxpayers would be wise to pay attention to how their local governments are doing. Specifically, sales tax revenues are pouring in far in excess of expectations and, in some cases, in excess of certain cities' ability to spend.

Provo, for instance, now has $1.7 million extra in its general fund, but it cannot keep the money as a surplus because that law caps rainy-day funds at 18 percent of total revenues. Meanwhile, as Salt Lake County and the state argue over how to allocate a sales-tax increase voters approved for transit, chances are the money that eventually comes in will exceed projections and go much farther than expected.

But while a lot of governments struggle with how to spend an abundance of money, one thing is clear. There never has been a better time for the Legislature to finish what it started last year and completely eliminate the sales tax on unprepared food. Beginning next month, 2 percentage points will come off this tax, leaving the rate at 2.75 percent. Gov. Jon Huntsman Jr., surprisingly decided to leave that rate in place when preparing his budget proposal, but he did say he would be open to any legislation that eliminated it.

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If that doesn't happen this year, with government budgets overflowing, it's hard to imagine a time when it would be easier to do.

In a conservative state, residents are bound to clamor that their sales tax rates be lowered to return some of the extra money to the people. There is merit to that idea.

But it comes with a caution. Cities derive revenue primarily from property, utility and sales taxes. Of the three, sales taxes are the most volatile. They fluctuate immediately and unpredictably with the economy, making it unwise, for example, to use a windfall to expand programs. It also makes drastic cuts unwise, considering a downturn may loom around the corner.

Sales taxes also tend to be the least unpopular among all taxes. Everyone, including tourists and conventioneers, pays them, and yet no one is forced to make a purchase that is beyond his or her means.

If the good times continue, lawmakers will have to confront the surpluses and adjust sales tax rates downward to keep cities from taking ridiculous measures to stay within the law. For now, however, they should content themselves with a first step, which is to take the tax off groceries altogether.

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