Wednesday, July 13, 2005

A Legislator Who Gets It - And One Who Doesn't

I attended the legislative Tax Reform Task Force's RDA subcommittee meeting this morning, where Sen. Greg Bell gave an explanation of his proposal from the last couple of years to change the local sales tax distribution formula from the current 50% based on point of sale and 50% on population.

Sen. Bell gave a good explanation of how the truth in taxation law has shifted municipal revenue sources more and more away from property tax and toward sales tax, cities more and more make decisions geared toward maximizing sales tax revenue. The buzz word for this has become "zoning for dollars." During this same time period, RDA projects have also shifted more and more toward retail projects.

Sen. Bell feels that the 50-50 distribution formula for sales tax still incents cities to seek such projects to enhance their tax base, and that changing the formula more to one weighted toward population and away from point of sale, will reduce this incentive.

While I agree that such a change will have some effect, I think that a more effective change would be to get the tax revenue mix for municipalities back to some kind of equilibrium -- make property tax more a part of the mix, and the incentive for maximizing sales tax will diminish.

Regardless, Sen. Bell by and large shows a good grasp of planning and community development issues.

Sen. Howard Stephenson, on the other had, well.... . As the League of Cities and Towns reps were making their comments, Sen. Stephenson challenged their premise that property tax has not increased and thus reliance on sales tax is a bigger driver for cities. He cited the growth in property tax revenue for cities from 1994 to 2004, saying, "How can you say this is not an increase for the cities? It has increased substantially, and I think your argument is false." Roger Tew, a former state tax commissioner and now a consultant for the League, and Lincoln Shurtz of the League, correctly pointed out that property tax revenue has indeed increased over that time, but to a far less extent than other taxes. Why? Likely because of the difficulties imposed by truth in taxation.

In any case, it is interesting to see how planning and development issues are playing such a prominent role in the legislature's discussion of tax reform. Whether this will actually result in any changes in the coming legislative session remains to be seen.

3 Comments:

At 1:43 PM, Blogger RudiZink said...

"While I agree that such a change will have some effect, I think that a more effective change would be to get the tax revenue mix for municipalities back to some kind of equilibrium -- make property tax more a part of the mix, and the incentive for maximizing sales tax will diminish."

Sounds rather vague, to me.

What would you propose, specifically?

 
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