Policy group calculates Utah tax, income ratios

By Sun Advocate

State, federal and local taxes consume 28 percent of a typical Utah family’s total annual income.
The financial burden shouldered by families residing at locations across the state jumps significantly when hidden assessments are figured into the ratio, indicates the latest annual study conducted by the Utah Taxpayers Association.
The independent public policy organization based the report on the earnings and spending of the households, including taxes directly paid by families and payroll assessments covered by employers.
The direct expenditures include income, sales and property taxes.
In addition, the association based the evaluation on an adjusted gross household income of $53,151, the median earnings for a Utah family in 2001.
The typical Utah family also lives in a home with a market value of $147,600, according to the criteria outlined in the report.
The report categorized the typical taxes and fees into seven major groups.
•Employment or payroll taxes – The category represents the largest single group of related expenditures.
Paid by employers, the taxes in question include workers compensation, unemployment insurance as well as the companies’ share of Social Security and Medicare.
In 2001, employment taxes comprised 7.6 percent of total income in Utah. Slightly more than one quarter or 27.1 percent of the typical Utah family’s taxes fell under the category.
•Employees are required to pay 6.2 percent of wages toward Social Security and 1.45 percent toward Medicare. The amount is matched by employers.
The employee paid portion of Social Security and Medicare comprised one-quarter of all taxes and 7.1 percent of total income in 2001.
•The typical Utah family’s federal income tax was 3.8 percent of total income.
The percentage of income consumed by the federal income tax was considerably less in 2001 than the share was several years ago due to the introduction of the child tax credit.
Without the $600 per child credit, the federal tax burden for the Utah family would have been 7 percent of total income in 2001. The total tax burden would have amounted to 31 percent of the household’s income.
•State and local taxes, including income, sales, vehicle and property assessments, comprise 34.3 percent the typical family’s public financial burden and 9.7 percent of total household income.
The state income tax constitutes the largest financial burden shouldered by the typical Utah family. The state tax consumes 3.4 percent of the household’s total income.
Sales and excise taxes follow at 3 percent, property assessments at 1.8 percent and auto taxes at 1.5 percent. Auto related expenditures include state and federal gas taxes as well as fees in lieu of property taxes.
Indirect or hidden taxes imposed on businesses and passed on to consumers, investors or employees were not included in the study, points out the independent public policy organization.
According to a study conducted by the Utah Tax Commission, businesses paid 42 percent of all property assessments collected statewide in fiscal year 2000.
Businesses also paid 34 percent of all sales taxes collected across the state, 10 percent of all state income taxes and 100 percent of severance as well as unemployment insurance taxes in 2000.
When major state and local taxes are combined, Utah businesses paid 29 percent and households paid 71 percent. The majority of economists agree that businesses do not actually pay taxes. Businesses collect taxes and pass the costs on to customers in the form of higher prices, to workers in the form of lower wages or to shareholders in the form of lower profits.
If the portion of state and local taxes paid by businesses were passed on to households, the state and local portion of the Utah family’s burden would be four percentage points higher, raising it to 32 percent.
Since state and local taxes tend to be regressive, a disproportionate share of the increase would be borne by lower income households.
Some financial analysts believe that if the hidden taxes that result from federal business taxes were added to the state and local hidden taxes, the Utah family tax burden would jump from 32 percent to 35 percent or more of total income, concluded the association’s study.