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Show Spending Demand Higher Than Tax The demand for government spending in Utah is high, but the tax capacity of the state is low. This was the conclusion reached by Utah Foundation, the private tax research organization, in its latest analysis of tax capacity based on a recent study by the Advisory Commission on Intergovernmental Relations. According to the Foundation report, Utah's taxing potential in 1979 was only 91 percent of the national average. This means that the same tax rates will produce about 9 percent less, revenue in Utah than they will in the nation as a whole. This places Utah at a considerable disadvantage in attempting to finance governmental services for its citizenry. The problem is compounded by the fact that Utah has one of the highest ratios of school age children to adult population among the fifty states, and education is the most costly function of state and local government. Tax capacity is a technique designed to measure the amount of revenue that would be raised if each state used an identical set of tax rates, The rates used in the "representative tax system" are based on national averages for the various state and local taxes used throughout the nation. Since the same rates are applied in every state, estimated potential tax yields vary only because of differences in the underlying bases. Thus, the resulting differences in taxing capacity on tax wealth reflect differences in a state's ability to raise funds from usual revenue sources. Foundation analysts point out that Utah, unlike many of the states, levies all of the major taxes imposed by state and local governments. Many tax authorities maintain that Utah's broadly-based tax structure is a strength in that it allows everyone to ' participate in the cost of financing government without imposing an undue restrictive burden on any one group or tax source. Although Utah has maintained a broad-based tax system, there has been some shifting in relative importance of the various taxes in the system during recent years. For example, the proportion of state and local revenue derived from the property tax has been declining, while the sales and use tax, the income tax, and the unemployment tax have grown in relative importance. As a result of these changes, Utah is somewhat above average in its use of the sales tax and the income tax, but is well below average in its property tax burden. The Foundation study also shows that there has been a definite shifting of tax capacity away from eastern states to western . i l Ti i r J auiica, dciwccu i?u emu 1979, the New England States lost four percentage points and the Mideast states declined by eight points in relative tax wealth. At the same, the potential tax capacity of southwestern states rose by nine percentage points, the Rocky Mountain states climbed by seven points, and the far west states increased by six points. Two major factors in this tax wealth shift, according to the study, are the rising real estate and home prices in the west and the growing importance of energy in the nation's economy. For the most part, the western states have abundant energy sources, while the eastern states are energy deficient. This is causing some shifting of industry and population from the east to the west. It has also raised the natural resource tax base of the western states. This is especially true in the case of such oil-rich states as Texas, Oklahoma, Alaska, and Wyoming. |