Utah’s Tale of Two Cities
Utah might have the nation’s strongest economy. The state is coming out of the COVID-19 pandemic with a $1.5 billion budget surplus and is close to pre-pandemic unemployment rates, all of which are indicators any other state would be envious of. Across the nation, states are dealing with significant budget cuts and slow economies even with the large federal stimulus infusions from the Trump and Biden administrations. But not Utah. In Utah, the apartment rental vacancy rate sits right above 3% even with new construction popping up seemingly daily. Utah’s diverse economy is growing, and tax revenue has seen a sizable increase from the pre-COVID fiscal years.
But these positive indicators are only half the story in Utah — while business is booming, the state’s most vulnerable and historically marginalized are only falling further and further behind. For the first time, more chronically homeless individuals are living on the streets than in shelters. Air pollution, which disproportionately affects minority communities, is continuing to get worse. Wages aren’t keeping up with the rapidly rising cost of living. So yes, there’s prosperity throughout the state, but there’s also a vast underbelly of growing poverty and inequities. Utah’s state leaders must take intentional actions and make the state’s economic prosperity a prosperity for all; otherwise, trickle-down economics will ruin the party once again.
Trickle Down Theory and Utah
Utah’s double-sided economy is no accident. For over a decade now, Utah’s state government, specifically the Governor and Legislature, are making a bet on trickle-down economics. And looking at all the positive economic indicators, one could argue the gamble is paying off. But look at a cross-section of Utah’s minorities, lower socioeconomic classes, and groups historically marginalized, and the returns on that bet aren’t looking as good as they once did.
Historically, trickle-down economic policies in America haven’t turned out well. The most well-known of these scenarios being the “Reaganomics” of the 1980s and subsequent breakdown of social, health, and anti-poverty programs across the country, taking away the safety net keeping many Americans from poverty. Trickle-down theory might make sense at first glance: remove regulation and increase tax breaks for the highest income earner corporations, investors, and entrepreneurs, and the benefits will be felt by all those in the economy because now there’s more “wealth” to go around. Research has shown, though, that this isn’t what happens.
Trickle-down economies experience “unique invariant wealth distribution,” with wealth accumulating quickly at the top and hardly at the bottom. In fact, some economists argue that trickle-down policies create an inverse, or negative trickle-down, wherein the standard policies of the theory create an easy pathway to wealth accumulation for those in the highest wealth classes gleaning off those in the lower. Once this pattern is established, negative effects for everyone begin to be felt from the high competition for limited resources, such as housing, and the “conspicuous consumption” of positional goods such as luxury items and exclusive trips or experiences. The benefits of trickle-down policies are simply not beneficial to all. The broad assumption that increased supply will mean increased services, goods, and wealth to everyone doesn’t hold true. It doesn’t because there are systemic barriers and stakeholder interests that prevent the trickling down to reach those at the very bottom.
Utah’s Brand of Trickle-Down
For a policy to be considered trickle-down based, two central things need to be present: First, the policy disproportionately benefits the wealthy in the short run. Second, the policy is to raise standards of living for all in the long run. In Utah, the trickle-down theory is seen in two key policy stances. Tax cuts come first and following closely behind is trickle-down tax cut’s twin, the notion that the private sector is best equipped to handle most problems. As Reagan might say, “Government is not the solution to our problem; government is the problem.”
Look to any Utah Legislative session in the past decade, and you will find bills proposing tax cuts. Even during the most recent 2021 General Session when the fiscal health of the state looked good considering the pandemic but financial and health leaders were unsure of the future and the budgetary impacts it might bring, majority party Legislators proposed multiple bills involving tax cuts. Tax restructuring, primarily tax cuts on more progressive taxes such as income and corporations, is the norm in Utah. Legislators are leaning into the idea that by giving money “back” to the people, that money will help all Utahns.
At the same time though, the state recognizes the deep need for tax revenue to fund infrastructure and other key issues facing a rapidly growing state. Their solution? In a series of Special Sessions in 2019, majority leaders decided to “lower the rate, and broaden the base” on taxes in Utah. It was sweeping tax reform, lowering the rate of corporate and income taxes while broadening the goods and services taxed in the state and expanding a grocery tax by almost 3%. In the end, the bill would have produced a $160 million tax cut in its first year, with much of the benefit delivered to higher-income filers- Trickle-down tax theory in a tangible form. A month after its passage, and the very real threat of a citizen referendum on the issue, the Legislature repealed the bill but still passed small tax cuts bills on targeted groups and classification in the following session.
Accompanying tax restructuring is the pattern of leaving the practical solutions to significant issues, especially those involving Utah’s most vulnerable, to the private sector. Out of the two main tenets of Utah’s trickle-down philosophy, this holds the most potential for harm. Here the private sector players are represented in nonprofits, religious groups, philanthropists, businesses, and individual Utahns. In Governor Herbert’s 2019 State of the State address, he addressed concerns about the growing interest in socialism among Utah’s young voters and socialistic policies. He highlighted that the free market economy has much more success for individuals than if significant issues were always solved through government action. And he has a point. Utah, when you look at specific economic indicators, is doing great because of decreased regulation and taxes on its citizens and businesses. But once again, it’s not the whole picture. Laissez-faire can only get you so far before those barely holding on ultimately fall behind. When people are left behind, like the homeless, refugees, BIPOC communities, individuals experiencing severe mental illness with little health care, this creates a strain on communities. Policing, hospital and emergency services, food banks, homeless shelters, federal government-funded housing, and other critical fixtures in a community begin to take on the burden of helping these individuals. Relying on a free-market economy with little regulation or social support to the state’s vulnerable is a risky move. It leaves the private sector to take up the slack, and if they can’t, real desperation sets in, and it’s hard to reverse. Escaping poverty is hard when there aren’t rungs on the ladder to help someone climb up and into a stable life.
And the practice of leaving issues up to the free market goes beyond just individual and community poverty. Utah is facing a severe housing crisis that gets even worse if you look at housing at or below 50% of the Area Median Income (AMI) (don’t even get started on housing for those making 30% AMI or below). The effects of unstable and unaffordable housing can be felt through generations, making the task of escaping poverty even harder. Utah is also facing a mental health crisis as youth and young adult suicide rates stay scarily high, and there are relatively minor actions being taken to address the increasingly toxic air pollution along the Wasatch front- the same pollution that is disproportionately affecting BIPOC communities, especially children. Adding to injury, the Inland Port, which will be located next to the BIPOC majority Rose Park neighborhood of Salt Lake City, will bring even more sources of pollution to the valley. After all this, the question is: what can be done?
Where Does Utah Go from Here?
Addressing the prosperity imbalance in Utah will be challenging, but it can be done. State leaders must balance helping the vulnerable and marginalized Utahns while also supporting the strong economy it’s crafted. The first step in this process is to address Utah’s tax structure and rates. State leaders were right in 2019 to say that the current tax system needs reform. The state’s Constitutional earmarks on revenue leave the state’s hands tied on a lot of issues. There was a significant reform passed this previous session, allowing for income tax to be used for more than just the state’s education fund. Further reforms are needed to reflect the strong and weak points in Utah’s economy. These reforms need to be carefully vetted through an equity lens, something that was largely missing in the 2019 restructuring process. Taking this approach will allow for cuts and increases in rates and broaden or narrow the base to be decided upon with wide eyes and vision for the impacts of these changes for everyone in the short and long term.
Along with a careful tax restructure, Utah needs to make its wages match its cost of living. At the current minimum wage, an individual would need to work just over 90 hours a week to afford a modest two-bedroom apartment (afford here means not spending more than 50% of their income on rent- this is the federal definition for housing affordability). A bill in the 2021 General Legislative Session called for a gradual, incremental raising of the minimum wage, but free-market arguments won the day and the bill stalled in committee. Utah’s housing costs and shortages are not going to sort themselves out in favor of those with low incomes- that’s against the tenets of a free market that uses profits and supply and demand to make decisions. If those doing well in Utah’s trickle-down economy are demanding housing and are paying high prices, the supply is going to match. An increase in wages could greatly help those experiencing homelessness who might have a job but are unable to leave shelters because they can’t afford any housing near their place of work. They are trapped in homelessness because there is no housing for them and nonprofits like The Road Home and the Utah Housing Authority along with federal grants and housing programs are left to help these people find stability and housing.
Is This is All Too Dramatic
Some might look at Utah and think our weaknesses are still better than those around us. I mean, the unemployment is low, the economy is diverse, promising stability at least for a while, and the large portion of the state’s population would probably rate themselves as doing well. Additionally, the Legislature and governor’s office, for all of their supposed missteps, did manage to steer the state through an economic shutdown and pandemic and come out largely ok. In this year’s General Session, over $50 million were appropriated to addressing the housing and homelessness issues throughout the state along with massive investments into the state’s infrastructure and education. And Utah’s leaders compared to other states and certainly compared to Congress and the President, get along great and are open to discussion and input from citizens and each other. So can we really complain? Are the trickle-down policies actually working?
It’s Not Dramatic When It’s Someone’s Life: Time for Utah to Step Up
Utah’s trickle-down economic policies are working great for only part of Utah. The prosperity isn’t being trickled down to everyone. In fact, there are whole communities in Utah facing almost insurmountable obstacles to a steady life with the state’s housing crisis, health-damaging pollution, and wages that don’t match what it costs to live a normal life. Utah has the chance to change this though, by turning from their prioritized tax cuts and philosophy that leaves the big challenges to others. Even those large appropriations into housing and homelessness are only going to see true, systemic benefits if private funders throughout the state donate their own money and time to nonprofits. And then nonprofits carry out the groundwork. Utah isn’t far from prosperity for all, but to achieve this the state’s leaders need to look past the trickle-down traditions and make innovative policies that make Utah’s economy work for all.
