When I was Lt. Governor, I often spoke at schools about how blessed we are to live in this country and have our freedom. Once in  a fifth grade class in Weber County, I asked the question, “What does democracy mean?” A boy said in a loud voice, "Democracy means that the people rule, so everyone has to do something." It was the best definition I had ever heard of democracy. I hope all of my children and grandchildren know that they too have the responsibility to do something.

I have had a remarkable life. While my family and God come first,  I marvel at the opportunities I have been given in the political arena of Utah. I urge women, including LDS women, to consider the opportunities to develop and expand their talents and service to their communities, state, and nation, especially when their children mature. In the legislature, I had the opportunity to be involved in a variety of issues, including water, transportation, and social needs. As  Lt. Governor, I was additionally able to gain experience with the election process, healthcare system, volunteerism, and social and workforce issues. This knowledge and experience was then of great use to me as Utah’s Governor, a position I was honored to hold even though it was for a relatively short period. And, throughout each political tenure, I was devoted to fighting for a quality education system.

With the assistance of an extremely capable staff, much of my career has been dedicated to education. This life long pursuit opened my eyes to other important intiatives that were critical for stability, not only in education, but for the state in general. I have chosen to write this article on one such intiative – one that is particuarly important to me and to many Americans, including the president—tax reform.  To think that tax reform could tell such a narrative! Yet by sharing a portion of my experiences that prepared me to fight for tax reform in Utah, I hope to show future generations what I learned by choosing to address an issue that most were not willing to confront. My experience suggests the reasons why there are issues like tax reform that most politicians will not seriously consider. This problem is perennial, and as I write this essay, the issue now grips our federal government as it heads towards a "fiscal cliff." Even though my attempt, alongside the work of many outstanding individuals dedicated to improving the future of Utah, was not a total success in outcome, it calls for a closer examination in principle. Tax reform was something that needed to be done, that was and still is critical to the future and stability of Utah, and of our entire nation. The legacy of a public servant should be the full attempt of doing what is necessary, even at the cost of personal agendas. That is the truth I found and hope to pass on to tomorrow’s leaders through my efforts with tax reform.  


Shaped By Experience

I was elected to the House of Representatives in 1980. Shortly after the election I asked the Speaker of the House at that time, Norman Bangerter, what advice he would give new legislators to assist them in becoming successful in that body. His reply was, "It is best to listen and learn the first year, and you should get to know the budget." Both statements proved to be sound advice. While the first part of the statement was helpful, it was the second part that helped shape my tenure in the legislature. I was made Chair of an Appropriation Committee inmy second term. I give credit for this appointment to the fact that I was reasonably knowledgeable about the budget. The appointment was somewhat unusual because Utah's legislature was then and is still today a male-dominated body. Again, I believe these unusual opportunities occurred because I could often answer questions dealing with the budget and fiscal issues. I was then elected to positions of leadership during my third and fourth terms as well.            

During my third term in the legislature, the Tax Review Commission was created by then Governor Bangerter with the hope that constructive tax policy would be developed. In addition, there was a major Tax Study group appointed to study tax policy and develop changes that should be made, in which I was able to be involved. Because many in our group and the other five groups were either lobbyists or from a special interest group, it was difficult coming to an agreement on any legislation. The results were that only two pieces of legislation were completed. Representative Frank Knowton sponsored a bill known as the “Truth in Taxation" law. It was clearly a tax limitation effort, for it stated that local school districts had to put any tax increase on the ballot if it cost more than the population growth. The Tax Review Commission unfortunately became only a legislative procedure policy. It was clear that the fear of the unknown changes was greater than living with the known shortcomings. This was true even with the understanding that there were many long range problems, which could be diminished or avoided if we tackled the issue in the near term.

As a result of my being in the Income Tax Study group, I began looking for solutions to bring some stability to the very volatile funding of the state education program, and looked particularly at personal and corporate income taxes. During prosperous economic times, the legislature would give tax cuts instead of adequately funding education, and then in slow economic times the legislature would cut education because of lack of revenue. In either boom or bust, the approach was to cut revenue for education! In my search for a solution, I discovered the rainy day fund concept which would create a surplus revenue fund in time of excess revenues and then have money available in time of need. In 1985 it was not an easy task to convince the legislature that they should have a reserve fund rather than giving the citizens back any surplus money. I did get the bill through the House the first year, but I was not able to do so in the Senate. Warren Pugh, the Senate Appropriation Chair, said, "any money we could put in a rainy day fund we should give to the people." Thus the bill did not pass. However, during the summer, Pugh went to Washington DC and was told about the beneficial aspects of an optional fund and came home excited to sponsor a rainy day type bill. The staff informed him that everything he wanted was in my bill, so my bill sailed through both the House and Senate the following year.

In 1992, I ran as Lt. Governor with Governor Mike Leavitt. During the ten plus years I was Lt. Governor, I chaired the Health Policy Commission that started the Children's Health Program. I also worked with six different agencies (that had twenty-three different programs) to start the Workforce Service Department. The consolidation of these agencies into a single department included an in-depth study of budgets and funding sources. Furthermore, a new piece of federal legislation, “The Motor Voter Bill,” also required fiscal knowledge. The bill made it necessary to change and expand the election office to coordinate with the Department of Transportation. This included recognition of the need to provide services and revenue changes.

When I became Governor in 2003, I made the decision that I wanted to prove that a woman could get things done. Therefore, I selected fourteen specific projects that I felt would improve Utah. Tax reform was one of the initiatives that was traditionally looked at by politicians as a political negative. And, perhaps, I was naïve to think that I could accomplish such a task. My experience in the legislature with taxes had shown me how difficult tax reform could be because of the number of agendas it influences. I understood the political negatives, but I had to ask myself the question, if I wasn’t willing to tackle the crippled system, then who would?  I felt that with both legislative and executive experience, I should be able to be involved in improving our system of taxation for future generations.

A Plan For Reform

Therefore, I immediately started the process of picking tax advisors who would be capable of professionally formulating tax policy that would be beneficial to Utah. As Governor, I was aware that our fiscal policy was flawed for the long term. My experience in the eighties with the large, all-encompassing attempt at tax revision, which had seen limited success, helped me see the neccessity of revisiting tax reform to help the state progress.

I understood my time as governor was probably limited, therefore I determined to keep the group small, using only the most trained, expert people we had. We determined that the group should be advisors rather than a task force, because the law states that the advisory could be closed whereas the taskforce title would demand open meetings. This was not normal to my usual political thinking, because I generally felt that all meetings should be open. Yet in this case, time and honest opinion took precedence over those that had interest in tax reform because of political or monetary reasons. Therefore, professional lobbyists and legislators were excluded.

For me, it was critical to appoint specialzied, knowledgeable, and capable individuals to determine the best tax policy for Utah. As a result, the following individuals were appointed as members of the Advisors Committee:
   Gary Cornia, who is now Dean of the Marriott School of Management at BYU
   Gary Doxey, my Chief of Staff, and legal counsel for Governor Leavit
   Justin Farr, with the Office of Budget and Planning, served as staff to the Advisor Group
   Bruce Johnson, Tax Commissioner
   Pam Henrickson, Chair of Tax Commission and a former county assessor,
   Leo Memmott, Deputy for Policy and served many years as Director of the Legislative Office 
   Gayle McKeachnie, my Lt. Governor and legal expert for rural Utah
   Ray Nelsen, a professor in the Marriott School of Management
   Val Oveson, a former Lt. Governor and Chair of the Tax Commission
   Keith Prescott, a partner in a regional tax firm,
   Lynne Ward, my Deputy Chief of Staff and former head of the Governor's Office of Budget and
      Chief Planning.

They all served as volunteers. We generally started around five o'clock in the afternoon and often worked until two or three in the morning. We did not even pay travel expenses. The task of the advisory group was to first establish goals. Since the group consisted of practitioners, policy people, academics, and those with legal and legislative backgrounds, we were able to establish goals from all different  perspectives of tax law.

Thus, the following goals were established:

Goal one was be fair, just, and balanced.
For example, many favored a strongly progressive tax. Others favored a flat or proportional income tax. Some believed that a reasonable or just tax pursues socio-political goals, such as providing economic incentives to firms, subsidizing the development of water projects, or assisting those below the income level. Others felt that a fair tax system is revenue driven and the first question that must be asked is whether the system generates sufficient and consistent levels of revenue to meet the needs of the state.

“Fair” tax is an ideal that is almost impossible to develop in any area or location.  The goal would indicate that the taxes are as just as the local, state and national government can make them in any given area. However, views about what taxes should be for ultimately undermine consensus on what constitutes a “fair” taxation system.

Goal two was taxes should support a business-friendly economic environment based on fair share. 
This includes compliance and tax incentives. Fair share means that the financial needs of city and county governments are balanced against the needs and obligations of state government. In addition, the tax system has to be "business friendly" and policies have to not only meet government needs, but also have to be designed to insure that producers of taxes have financial returns sufficient to give stability of profitability.

Goal three was the need to focus on funding critical need.
To my mind, critical need encompassed primarily education, transportation, public safety, and Medicare. When we matched the needs of education based on the expected growth in the state, it was obvious that in twenty to thirty years Utah would have significant difficulty meeting the growth of the student population -- even if we chose to remain in last place compared to other states in our country! The question was then, are legislators going to realize the critical need to change our tax policy that will provide greater stability to education, or will the state legislature wait until we are in a crisis situation prior to taking action? I had hoped to convince the legislature that preemptive action was preferable.

Goal four was to develop structural balance in our tax system.
A prime reason to do this was to keep our triple A bonding rates. The state's bonding rate is also
available to local school districts, and thus this decision would not only help state bonding efforts, but local bonding efforts as well.  Therefore, there was a conscious decision made to keep a balance between state and local taxes, as well as a balance between taxes and fees. Structural balance is when the tax dollar is fairly distributed between national, state, and local needs.

Goal five was the need to develop a taxation system for the 21st century.
The Utah tax system was based solely on property tax until the early 1930s when many people had to sell their homes because they could not pay their taxes during the Great Depression. As a result, the state income tax was established to fund education. The Utah tax system is still based primarily on mining, agriculture, retail, and manufacturing, as it was in the early days. We hoped that the Utah state legislature would begin to focus on services, stocks, and intangibles in order to broaden Utah's tax base so that our slogan of "broadening the base to lower the rates" would become a reality.

Goal six was to bring balance between state and local obligations and gain the resources to fund the balance between the different groups.
A logical taxation plan would diminish arguments between state and local government regarding funding for services. For example, it does not make sense to have numerous islands in Sandy City that are part of Salt Lake City. As a result, the county travels over the city roads to maintain small sections of the county roads that are within the city. Such duplication of services increases the cost to the taxpayer and creates problems for the governments involved. In other words, there will always be insufficient funds to meet the ever increasing needs. Likewise, there will always be special interest groups that want a precentage of the tax dollars to fund their projects. The tax laws need to be written in such a manner as to be fair and just as possible.

After months of study, debate, discussion and compromise, the Advisory Group developed the following recommendations:

Retain the traditional three-legged stool which is comprised of income, sales, and property tax.
The income tax is constitutionally dedicated to education. Sales tax primarily funds the general state   budget. The property tax funds the local government and education building funds.

Simplify the individual income tax. 
The basic need was not only to simplify the form, but to exchange the property tax, which is used for the building, land, and maintenace funding, for the income tax in terms of funding education. The income tax traditionally funds educational operations, such as teachers’ salaries. When there is an economic downturn and income tax revenues fall, there is no longer adequate funding to pay those salaries. However, property taxes- unlike income taxes – are more stable, but this funding is reserved for building and maintaining schools and buying additional land. Therefore, the more stable tax should be exchanged to fund or partially fund the educational operations for the students. This includes the recommendation to adopt a flat tax broadening the base that would allow the overall tax rate to be lowered. We would also require one adjustment of increase to the federal taxable income—we would allow the state income tax to become a permissible itemized deduction.

Eliminate the Corporate Income Tax
The corporate income tax surpassed the individual income tax when it was first passed, but in the 2003-2005 years it only brought in $120-184 million and was expected to continue to decrease in the future. To offset this loss, we recommended a double weight to the sales factor and a minimum filing threshold. Double weighting is giving greater weight to one tax over the remaining two. For example, the sales tax could be given fifty percent, while property and income tax only twenty-five percent each. Establishing a filing threshold is a statement by the taxing authority determing the lowest level of income that an individual must file taxes. This level usually changes every year by the various taxing authorities.

Simplify and expand the sales tax exemption for business inputs
Taxpayers should know what taxes they are paying, therefore taxes for business inputs should be kept simple. The pyramiding of business taxes should not be expanded. Pyramiding of taxes is the process of taxing electronic digital items such as records, movies or books. There is not only the question of whether they should be taxed, but what jurisdiction has the right to tax them.

Businesses should be exempt from a value added tax
The recommendation is that a uniform sales tax exemption be given on any asset purchased by a business that is manufacturing, distributing, selling, or otherwise providing goods or services. A value added tax is where a tax is added at every level of production. An example is for a new car, a tax would be added for the tires, the transmission, the steering wheel, the air condition system, etc, etc. For a new car, if there was value added tax for every separate item the list could include over a hundred taxes. It would not only be confusing, but almost impossible to collect. Having only one collective tax on the car is simpler for the purchaser and certainly more efficient for the tax collector.

Monitor the rate of the sales tax
We felt broadening the sales base to include services would raise a significant amount of new revenue.  In our current world, the United States is becoming more and more of a service provider. Because of the existence of so many political constituents, no state has moved to a service based tax code. We need to adjust our tax system accordingly.

Continue to participate in the streamlined sales tax proposal
This project does not create a new tax, but instead provides a fair way to collect an existing tax.

Simplify the rate structure and distribution of the local sales tax--Distribute the sales tax based upon population
Utah currently has a plethora of local sales taxes that retailers must collect. A uniform tax throughout the state would provide a simple solution.
Retain the general structure of the current property tax system
Utah has a strong uniformity and equalization clause in its constitution that requires most property
to be taxed at full fair market value. Utah is one of a handful of states that assesses and reports
property and improvements at full market value. This practice is an important ingredient in keeping
the property tax transparent and understandable to property owners.

Fund urban and suburban water use with fees, rather than a property tax
Water is a commodity and should be paid for by the people and entities using that water.

Centrally-assessed property should be re-evaluated
The centrally-assessed  property has fallen below the value of other properties and should be reassessed. Many businesses such as railroad companies and companies that produce gas for heating involve many, if not all, counties within a state. As a result, legislation passed that led to the state developing a process where the state imposed a centrally assessed property tax. Especially with railroads, the tax revenue has decreased instead of increasing as a result of the centrally assessed property tax. The tax imposed on these corporations has fallen below their fair share of the taxes collected.

School districts and other special districts should be allowed to benefit from redevelopment initiatives
School funding has been decreased by many of these redevelopment projects. School districts should be allowed to gain the rewards of these projects sooner. When private developers were encouraged to build major projects such as shopping centers in urban and suburban centers, they were allowed to not pay any property taxes for a given number of years. This not only decreased the amount of taxes local governments paid, but also decreased the amount the school district collected. It has been argued that eventually the school districts receive additional tax money because of the redevelopment. The advisory group felt that school districts should not be included in the redevelopment contracts, but should be able to continue taxing the property all along.

Modify motor fuel taxes
Gasoline taxes have not been increased in the state of Utah for over twenty years. It is ridiculous that this user fee has not increased as the cost of gasoline increases. The tax is based on cents rather than on percentages. The amount should change by at least fifty percent based on percentage. All other sales tax is based on a percentage of tax. If only half of the sales taxed were based on percentage, there would be a significant increase in the transportation fund to help build roads. The other half could remain based on cents to give stability to the gas tax.

Increase the severance tax and invest the proceeds
Utah has been very reluctant to increase severance taxes. Severance tax is a tax based on oil, gas, and other precious metals. This tax is much lower in Utah than it is in other states. Also, Utah does not have a severance tax on coal. This should change and the proceeds from the change should be invested in either the rainy day fund or a severance tax rainy day fund, because at some point these resources will be depeleted.

Retain the state inheritance tax
The state inheritance tax should be retained unless the federal estate tax is finally eliminated. 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             When I announced the need to formulate a total tax revision plan for the future of Utah at a press conference in November, I anticipated having the plan ready to present to the legislature, the press, and public by August 1, 2004. As we progressed with the tax reform meetings, it soon became apparent that additional time was needed in order to make decisions, as well as to fully test the validity of those decisions. We felt that each proposal we made had to be tested in terms of what effect the decision would have on the future revenues of the state. The modeling of each tax proposal took time, as many revisions were required. We were ready to make the proposals public by the end of August.

The Fickleness of Politics

However, when our work on tax reform was complete, it became very apparent that if the recommendations became part of the election process, the pressure by special interest groups would be so strong that the candidates would probably eliminate bits and pieces of the proposal before the changes had a chance to be debated in the legislative process. Furthermore, since I had announced my major initiatives early in my administration, there was press interest in our efforts from the beginning. This was especially true after the 2004 session when I announced that I would be running for reelection.

The full realization that the recommendations we were making would have serious political consequences came to a head when I learned that the Realtors Association was endorsing someone else.  In the past, I had always had their strong endorsement and it came as a shock that they were endorsing someone else because we were considering taxing services. The fickleness of politics became a reality when I found out the Accountant Association was also endorsing another candidate because of the same concern. It was clear that for some, the politics of the pocketbook became more important than making statesmanlike decisions.

An article written by blogger La Var Webber clarified the problem I was having. It read, "Governor Walker is so busy working on her tax policy for the future that she has limited time to put the same dedication into her reelection strategy. Since she entered the campaign so late, she has some tough choices to make. Basically, it is, should the time be spent on being governor or should the focus be on being a politician?" [1]  Quite frankly, I was probably more concerned about feeling that I had to prove that a woman could be capable of getting things done. I was well aware that other women would be governors in the future and I did not want it stated that Utah had had a female governor once and she did not do much. Therefore, I chose to work on implementing the other thirteen intiatives—even if I had to pay a severe political price for doing so.

The press seemed to be very positive about the changes in taxes we were recommending. For example the Salt Lake Tribune stated,

"Olene Walker is proving to be a no frills governor. Her tax proposals are the most in-depth that has ever been suggested by a governor. Working with a professional group of tax advisors, she has crafted proposals that will keep the legislature busy during the coming session. Taking the approach of a teacher instructing her students in the basics, Walker spelled out to the Legislature leadership the reasons tax reform is mandatory. The motivation for her dedication to tax reform clearly is the predicted upsurge in new public school students ----145,000 over ten years. However, many of her proposals will fall on the deaf ears of the legislators. The thought of putting taxes on services, or relieving businesses from paying corporate income tax in order to broaden the base and lower the rate is too difficult for many legislators to absorb. We hope they will at  least use the Walker Tax Reform proposals as a road map to finding a more stable funding formula for education. Walker performs well in her role as governor. Utah's legislators aren't really her pupils, but if they ignore her proposals, especially for education, there is a pretty good chance they'll get their knuckles rapped in the future." [2]

We spent a great deal of time educating the press about our proposals. We visited the editorial boards and generally got very positive support.  While there was a very strong support for the concept of comprehensive tax reform, it was geared towards the idea in general, however, rather than on the specifics.

As I had begun to foresee, the cause of tax reform took its toll on my political position as different groups feared how the reform might affect them as the elections drew near. Even though the Republican Party chose to back Jon Huntsman, Jr. for governor, the proposals my team and I had fought for were set to be discussed in the 2005 Legislative Session. There was hope that change would still be forthcoming; perhaps my status as an outgoing politician without a vested political interest in the outcome would strengthen the reform initiative.  In this, I was to be disappointed. Governor Huntsman's focus became the political benefits of cutting taxes: the concept of improving overall tax policy in Utah was lost.

The 2005 Legislative Session

After the general election, we expected a strong leadership role by the Governor in seeing that a comprehensive tax policy was implemented. Jon Huntsman had made tax reform his number one priority in his campaign. However, he had also campaigned to remove the sales tax on food. Once in office, the removal of the food sales tax quickly became his version of tax reform. While removing the sales tax on food did lower rates, it did nothing to broaden the base. In fact, it made the base narrower. While I had always hoped revenues would allow us to eliminate the sales tax on food, I felt the most important issue was broadening the base to provide adequate funding for services, especially education, in the future. Immediate payoffs should have been tempered in mindfulness for future generations, but they were not. 

Other differences in values and goals arose as interested parties were able to understand the initial proposals. These conflicts are an essential part of the tax reform process and are a fundamental way of ensuring that competing concepts and ideas are heard and considered in the final product. I had been interested in producing proposals that were grounded in sound economic tax policy to ensure a stable tax base for Utah during the second century of statehood. I was fully aware that these proposals would be challenged and modified in the process of political debate, but I hoped the big picture for the future would remain an essential part of the discussion.

An early casualty in the process was the concept of broadening the tax base to include taxing services.  As revenues continued to increase, the interest in removing the sales tax from food became more desirable and the interest in broadening the tax base decreased. The two main services that were not taxed were education and healthcare. There was no sound reason to tax education and politically it would have been extremely difficult to tax health care services. By this time there was also a strong resistance to taxing any other services such as accounting and real estate – especially when such group endorsements were needed for political favor in Utah state politics.

There had been strong support at first for removing the corporate income tax to have a business friendly state, however, when the realization came that the loss of funds from the corporate income tax would have to be made up by other revenue, the support quickly faded. Even in the business community there was a feeling that removing the income tax might cause a significant increase in their property tax. As a result, the reform package soon morphed into a focus on reforming the income tax and removing the sales tax on food. 

Our theme of "broadening the base and lowering the rates" soon became "simpler and fairer.” The fairness issue of the flat tax continued to cause concern. The higher income percentiles pay the majority of the income taxes. Under the flat tax there would be a shift of tax burden that would necessitate tax relief in the form of a credit to low income individuals and a phasing out of that tax credit based on filing status and the number of exemptions. Determing the size of the tax credit and phase-out range required intensive data mining and analysis by the legislature. Although many public finance experts suggested maintaining focus on the overall equity of the tax system, the public inevitably became preoccupied with tabulating winners and losers. By the last week of the session, it was clear that there was not going to be any tax reform  legislation passed.

Despite growing negligence to a vision of lasting change, my team and I felt a measure of success in that the boring issue of tax policy was the major focus for an entire legislative session. It was an educational process for both the new and old legislators. The various aspects of tax policy had been discussed in terms of what would be most beneficial in the long term. Yet, the end result was to do what all politicians do when decisions are difficult - to "form a committee.” The goal was then to study the issues and make a report to the 2006 legislature. [3]  The can had been kicked down the road.

The 2006 Legislative Session

During the 2006 legislative session, revenue continued to grow. Tax reform discussion continued, but agreement on how to reform the income tax became increasingly difficult as legislators clung to the idea of not having any losers—the idea that no entity would pay more in taxes. The Governor and his staff concentrated on removing the sales tax on food rather than any attempt to broaden the base. This allowed the political discussion to become much easier for them. Instead of debating for a stable future, the critical point was then simply how much do we dare lower a tax in order to gain political favor with the public? Some of the more seasoned legislators, aware of the historical realities of an economic downturn, insisted on retaining a 2% food sales tax. As a result, the sales tax reduction was passed the evening of the last day.

2006 Special Session

Governor Huntsman fulfilled his promise and called a special session to deal with nothing but tax reform in this special session. Utah’s economy was in a robust period and, as a result, there was significant surplus revenue, especially in the income tax pool. Some legislators continued to insist that their constituencies have no losers, so a dual system of paying income tax was created. The dual system allowed an individual to choose between paying income taxes under the old system that was based on graduated rates with deductions and exemptions, or a new alternative flat tax based on Federal AGI with no deductions or exceptions. Any taxpayer that did not benefit from the new flat tax could elect to file under the old method. It was somewhat ironical that while many criticized the complexity of a dual system, it was passed without any significant opposition.

The 2007 Legislative System

The new dual income law was supposed to create an orderly transition to a flat tax system.  Unfortunately, most of the taxpayers still found it advantageous to calculate their tax liability using the old tax code. There was political pressure to amend the flat tax component of the dual system to entice more people to participate in the flat tax. To encourage more taxpayers to participate in the flat tax side of the dual system, Huntsman and the legislature agreed to pursue the hybrid flat tax. This allowed lower and middle income taxpayers to claim phased-out credit based on the federal standard itemized deductions. A credit was also allowed for retired citizens to avoid a significant tax increase. Members of our original Tax Advisory group testified that the dual tax system was a step backward from the simplicity that had been originally envisioned. Some legislators also worried that with time the flat tax system would become more and more complex with a wide variety of reductions and deductions. That would eventually result in two existing and complex means of calculating income tax, which was the opposite of what everyone had hoped to accomplish.

Further complicating the reform discussions was the perceived political necessity of passing a tax cut.  Because of record revenue generated by a booming economy, legislators felt compelled to limit the growth of government spending by cutting taxes despite a general desire among voters to dedicate surplus revenues to stabilizing education financing. However, there were some legislators who wisely reminded everyone of possible revenue inadequacy during a downturn due to the volatility of the personal income tax, which reminders tempered some of the tax-cutting zeal. Others understood the need for a more stable tax system for education funding.

After all the debate and political promising, the final result was an omnibus bill that was formulated at the end of this session. The bill mandated a modified flat tax that was a single-rate tax with phased-out credits. It also further reduced the state sales tax on food. Surprisingly, the bill passed both houses with an unanimous vote.

Today and For the Future

Since 2007, the Utah tax policy has remained relatively the same. Was the final product the long reaching tax reform that we had hoped for? Absolutely not! The omnibus tax reform bill that passed did not have many of the sweeping and comprehensive changes that we envisioned. Perhaps the most negative factor about the "tax reform" was that it basically gave away all the positives of lowering rates without requiring a tradeoff in the form of broadening the base. This would have required absorbing what would have been seen as negative political repercussions. However, the fact that three years of discussion and debate was focused on tax reform and the need to improve the tax structure of Utah was indeed personally rewarding. This may have been the beginning of some future efforts that might truly broaden the base as well as lower the rates. But since tax reform is such an extremely difficult political issue for any politician, I expect another debate on serious tax policy will be put off as long as possible. This delay of action will therefore happen even though Utah is currently last in pupil expenditure and is below the national average in commitment to education.

Shrugging off tax reform is not unique however; certainly that has been the case at the national level, as we approach a “fiscal cliff.”  But these are precisely the types of reform processes that wise leaders must undertake if they take seriously their charge not only to care about the short term, but also the long term health of their state or nation. Of course, it is anticipated that there will be small tweaks in the tax law as different needs and problems arise, but an in depth change in our tax system simply will not happen unless Utah citizens are willing to elect a governor and legislators—or at the national level, a President and Congress--who care more about tax policy and other issues than they do about being re-elected. I do not forsee another indepth tax policy debate in Utah until the shortage of revenues becomes so critical that some future governor and future legislative leadership will be forced to change the basic tax policy. And then the pain will be more intense than it would have been had these reforms been implemented earlier.


The Lessons I Learned

I learned many lessons from this experience. Number one, I learned of the amazing commitment of the volunteers who worked on the Advisory Group. I could not have worked with a more outstanding and capable group in the country. Their dedication and longterm vision continues to give me hope for the future. However, while I deeply value their service, I also learned that working with the small group created problems for every legislator who only looked at the proposals based on immediate payoffs for them or their constituents. There seemed to be too little understanding that the process was geared to what was best for Utah.  In retrospect, I needed more buy-in from stakeholders, and by creating the Advisory Group, I prevented that from happening.  At the same time, I have no doubt that the Advisory Group could not have spoken the truth about what tax reform was really needed if we had included professional lobbyists from the outset. This is a perennial problem in tax reform efforts.

I also learned that to educate the public on the basic issues of tax policy is extremely difficult because the word ‘tax’ is totally negative in their eyes.  In addition, I learned that there is no optimal point in the business cycle to implement tax reform.  It makes no difference whether it is a strong or weak business cycle, no one wants to seriously think about tax policy, ever. That is why it was critical to have Dr. Gary Cornia chair the advisory group, as well as it was essential to have such knowledgeable and competent people working with us.  Dr. Ray Nelson  from Brigham Young University did a remarkable job in supplying us with real time charts, graphs, and information. Our objective was to make the tax reform revenue neutral. I was continually amazed at the competent work he provided in so little time.  But even the best education on tax reform could not get past the political barrier.  If we were unable to reform taxes in an era of surplus revenue, what will it take?  When will it ever be possible?

I  also learned that we did the right thing by looking at taxes as a whole and not tackling each issue separately. Unfortunately, this lesson was learned in the breach, by watching what became of our tax reform ideas in the hands of floundering leadership. In reality, it is impossible to create tax reform by looking at each tax independently. The need to look at the whole picture is essential to really developing a strong tax policy. Will it ever happen? I don't think so, because taxes are a negative in most people’s minds. Does that mean I am sorry I spent so much time on the issue? Of course not! It was a great learning experience, and I know that sometime, somehow comprehensive tax reform will be discussed again and perhaps the results will be positive.  But I hope whoever in Utah has the courage to take on that monumental tax will take our story as a cautionary tale.

The final lesson I learned was that despite my twenty-three years involved in the political process, I was naïve enough to think that I could propose the tax reform proposals and expect to be re-elected governor.  It was difficult to get the special interest groups to realize that we expected many changes in our proposal as tax reform was discussed, debated, and analyzed in the legislative process. Instead of supporting us through this political process, they only saw the negative political aspects of some of our reform proposals.  But, on the other hand, I have to still ask myself, based on my experience in the legislature, the executive branch, and my life, “if not me, then who?”

Looking to the Future with Hope

In conclusion, among the most poignant outcomes of my experience with tax reform is knowing that I, along with the people I was honored to work with, was able to recognize a long term problem for our posterity and make it an issue those running for Governor had to respond to, even if they did not actually wish to tackle it. As a result of the Advisory Group’s work, the Legislature spent three years with a focus on tax policy. Additionally, some of the proposals passed, such as a modified hybrid flat tax and a reduced food tax. It was rewarding to see that there began to be a sincere desire on the part of  legislators to become better informed about tax issues.

Alongside these small triumphs however were more unfortunate outcomes including the fact that the legislature spent a great deal of time on basic tax principle, yet after three years, they passed legislation for the short run, with almost no regard to the long-term needs of the state. Very little was done to enhance the economic advantages that would encourage positive economic development. It was especially disappointing to me that despite all of the efforts of the Tax Advisory Group to educate the legislators about the importance of looking at the long-term picture, almost all off the legislators continued to look at tax legislation only in terms of what it would do for them and their constituents in the present.  Maybe it takes a woman leader to prioritize what will happen to the children and the grandchildren, but it shouldn’t—especially not in Utah.

And yet the most disturbing outcome to me was the Legislature’s total disregard of establishing a broader base to give greater stability to the future. Instead of funding education, the legislature took eight hundred million dollars out of the general fund to provide funding for support bonds for road construction. This decision tied up eight hundred million dollars and thus narrowed, instead of broadened, the base. The Governor and the Legislature had a three year opportunity to provide a stable tax base for the future of Utah, especially for the future of our students, but in the end they choked.  The political price was too steep, in their minds. In my opinion, this was a real tragedy. This decisive failure may have been an easy way out for current leaders, but it will most assuredly be a heavy burden for those after us to bear.

The future of tax reform, or of any reform that is necessary for the good of the state, lies with the people. I extend the advice to listen, learn, and know the budget to become an informed participant. If the people can encourage honest and capable individuals to run for office (even if that means running yourself) and then work to see that these are elected, then change will happen. We must have leaders who are willing to make tough, albeit correct, decisions, even when there is political pressure to back down. This is the legacy I hope to leave by example in public service. The future should not be taxed by shortsighted compromises for personal gain; the next generation needs to know they are worth more than that.



[1] "Utah Political Daily" Blog, LaVar Webb  [Back to manuscript].

[2] Salt Lake Tribune, Nov. 22. 2004 [Back to manuscript].

[3] Utah Foundation Brief "Utah's Tax Burden", May 2005 [Back to manuscript].

Full Citation for this Article: Walker, Olene (2012) "The Perennial Issue of Tax Reform: My Experience and Lessons Learned," SquareTwo, Vol. 5 No. 3 (Fall), http://squaretwo.org/Sq2ArticleWalkerTaxReform.html, [give access date].

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