Effects of Broadening the Sales Tax to Services

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Last November, former Governor Olene Walker released a comprehensive proposal to reform Utah’s tax structure to better meet the state’s future needs. One of the featured recommendations in the proposal was to broaden the sales tax base to include services that are provided to personal consumers. The reasons for the recommendation were that broadening the sales tax base would take into account current economic trends as well as making the tax more balanced and fair by distributing the tax more broadly and allowing for a possible reduction in the sales tax rate. The proposal also stated that a reduction in the rate would lead to a less regressive tax because the poor would be taxed less for necessities. This research brief will explore the rationale behind the proposal to broaden the sales tax to include services and the issues surrounding the proposal.

 

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