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Show SalesTax allocation studied by foundation Reallocation of local sales tax revenue according to population would hayea devastating effect on the finances of the larger cities of the state, especially those which sustain large commercial and industrial complexes within their city boundaries. boun-daries. This was the gist of a report analyzing the allocation of local sales tax revenues prepared by Utah Foundation, the private tax research organization. The study indicates that a change in the allocation from pointof-sales to population would reduce local sales tax revenues to Salt Lake City by 43 percent, to Murray by 67 percent, and to South Salt Lake by 77 percent. Other cities that would be particularly par-ticularly hard hit by such a change would be Vernal, Orem, Price, Logan, St. George, Midvale, Richfield, and the ski communities of Alta and Park City. Areas that would benefit by such a reallocation are the so-called "bedroom communities", residential areas which support a relatively small amount of commerce and industry. in-dustry. Other beneficiaries would , include some of the unincorporated areas and the small rural com- munities of the state. Foundation analysts point out that the controversy surrounding the method of allocating local sales tax revenues has been simmering in Utah for nearly twenty years. The local sales tax was authorized by the 1959 Utah Legislature "to provide the counties and the municipalities of the state with an added source of revenue and to thereby assist them to meet their growing financial needs". Over the years, various Attorneys General in Utah have ruled any change from the present point-of-sale allocation to a per capita distribtuion would be in conflect with the State Constitution. As-a practical matter, therefore, a constitutional amendment amend-ment probably would be required before any change in the present method of distributing local sales tax could be made. Following are some of the major arguments presented supporting such a change: 1. Government services are provided mainly for people. Population is the best measure of service needs. 2. Part of the sales tax revenue received in many communities actually ac-tually is paid by persons living in other communities or in unincorporated unin-corporated areas. 3. The present allocation system encourages municipalities to annex business properties and discourages the annexation of residential properties. 4. The present system encourages "planning blackmail" where firms may resist enforcement of county zoning laws by threatening to locate or annex into municipalities desiring the added sales tax revenue. 5. The sales tax collected from a business firm is not related to the services required by that firm. 6. Administrative costs would be reduced because sales would not have to be reported by location. On the other hand, those favoring no change in the present allocation system list the following arguments: 1. Cities benefitting from the present distribution must provide many services to nonresidents who work, shop, or otherwise enjoy the amenities provided by the city. The sales tax paid by these nonresidents merely reimburses the city for a small part of the added costs for such services. 2. Distributing sales tax funds on a population basis would discourage economic development in the state " because communities would seek residential rather than business development. 3. Daytime populations in some Utah cities may be three or four times the official resident counts. 4. Reallocation would discourage the tourist industry because tourist communities would be forced to share most of their sales tax revenues with communities which provide no service ser-vice to out-of-state visitors. 5. Some communities would receive windfall gains at the expense of those communities which pay the price for commercial and industrial development. 6. Data provided from the present point-of-sale accounting is extremely valuable to economists, planners, and forecasters attempting to understand the Utah economy. The Foundation observes that the allocation of local sales tax revenue is .' . one of the major issues that is being considered by the Governor's Tax Revision Committee. This committee currently is studying the Utah tax structure and will be making its '. recommendations later this year. ; Something on your mind? : |
