The State of Economic Freedom in Utah

In recent history, Utah has become very good at winning what could be called “best of the worst” awards. In an era of overregulation, stagnating wages due to inflation, and a new tax increase at every turn, winning any number of these awards doesn’t prove much more than us being better than other states. “Best Managed State,” “Best State for Business,” “Best Economic Outlook” — the list goes on and on. 

The same can be said for the Fraser Institute’s Economic Freedom of North America 2017 report, published today, that shows Utah in a tie for 3rd place behind Alberta, Canada, and New Hampshire in the summary rating for economic freedom at the “all-government level.”

But when diving deeper into the report and the ratings, a better picture is provided on how Utah has a lot of room for improvement.

When the federal government is removed from the picture and instead the focus is on the sub-national (or state) policies, Utah drops to 18th. Three specific low scoring sub-ratings show where Utah could foster additional economic freedom:

  • Transfers and subsidies as a percentage of income
  • Income and payroll tax revenue as a percentage of income
  • Sales tax revenue as a percentage of income

In other words, in comparison to other jurisdictions across North America, Utah takes too much in income tax and sales tax relative to how much people are earning. A large portion of these funds are then redistributed to other individuals and companies in the form of individual and corporate welfare.

At a time when Utah is considering further increases in income and sales tax rates, it may be prudent to study Utah’s competitiveness relative to other states. These tax increases may very well jeopardize the state’s reigning status of “best of the worst” in economic freedom.

Find the full report here.