When Doug Macdonald speaks, we should listen

Doug Macdonald is an economic consultant and was the executive director of Utah Issues and the chief economist of the Utah State Tax Commission. He understands the funding of Utah’s state government better than anybody – or at least anybody that is willing to talk to the public.

And, better yet, he can explain things in a way that real people (read "not economists") can understand. Want to know how we got where we are with the State’s budget? Ask Doug. He can tell you.

For the last election, Doug provided us with a very detailed report how changes in Utah’s tax system had gradually shifted what now amounts $1 billion each year out of education programs.

Republican legislators can tell you all they like about how they have put the most money into education ever in the past few years, but had they left the funding system alone and done nothing we would have $1 billion each year more in education investment. Their actions hurt, not helped, education attainment in Utah.

Now, Doug is warning us that the Republican legislature’s plan for massive 15% budget cuts would shrink the Utah economy another 3% in this time of recession and that reducing public education salaries may have the perverse effect of derailing Utah's long-term economic growth potential, too.

He wrote in an editorial published in the Salt Lake Tribune on January 11 that, "For better or for worse, state government is a pretty big economic player in the Utah economy. Including public education, it accounts for 10 percent of the total employment. Its $10.6 billion budget equates to 10 percent of Utah's $100 billion economy."

Hmm . . . very alarming. What should we do?

Now, we come to Doug’s fix: During the early 1990s Utah’s sales tax rate was 5% with food sales in the tax base. Without food, the rate would have been 5.5%. If raised from the current 4.7% to 5.5%, the hike would bring in $400 million. On the income tax side, the governor lowered the nominal top rate from 7% to 5%. A rate of 6% would furnish education with at least $400 million. In total these two changes would bring in $800 million and almost eliminate the projected revenue shortfall with only two word changes to Utah's tax code.

Doug says, "We cannot afford to slow down our efforts to provide a first-class education just because it is politically inconvenient."

Our immediate reaction to increasing taxes in a recession is a firm "No way!"

But we bring up this subject today in response to yesterday’s inauguration. As the Salt Lake Tribune editorial put it, "Obama's message also was a summons for all Americans to grow up and embrace their responsibilities as citizens."

The Republicans in Utah have put tax increases on cigarettes, gas, internet purchases, services and a whole host of other fees on the table. These targeted fees and taxes that disproportionally hit certain segments of the population are really being used to "backfill" general funding needs. We should at least ask ourselves if small increases in broad revenue programs that ask each of us to share the burden is more responsible and grown up.

Whether Mr. Macdonald is right or wrong about where we go from here, he is thought provoking and well worth listening to his concerns and his proposals.

What say you?