by Howard Stephenson
In its first year of existence the Salt Lake County Council made some significantly impressive decisions, not the least of which was slashing the property tax hike adopted by the outgoing County Commission and adopting a no-growth budget for 2002. But now the Council is considering two proposals which could seriously hurt taxpayers.
Both proposals would require legislative approval. Both would involve new taxes.
1/4 Cent Sales Tax For the Homeless
The county council will likely decide this week whether to seek statutory authority for a four-year 1/4 cent sales tax hike to create a $150 million homeless trust fund endowment. The fund would then produce earnings of about $9 million per year, $2 million of which would be plowed back into the trust fund while $7 million would be spent to assist 30 different charitable organizations which serve the homeless.
Council members aren’t seeking authority to impose the tax themselves. Instead, they want to ask voters to approve the new tax at the polls. Unfortunately, this sidestepping of responsibility by elected officials is becoming a popular technique for obtaining approval of ideas elected bodies wouldn’t endorse on their own. It was used for the restaurant tax, the Zoo, Arts, & Parks tax, and the transit tax. It’s a way to circumvent representative government and get a few special interest voters to adopt new taxes in the name of public involvement. Since the legislature doesn’t have the nerve to approve the tax and locally elected officials won’t approve the tax, they avoid accountability by placing the issue on the ballot. The real, legitimate purpose of initiative and referendum is to protect the people from bad decisions of elected officials, not to make decisions which elected officials are afraid to make themselves.
Utah sales taxes are already 9th highest per $1,000 of personal income. The sales tax has become a Christmas tree with an ornament for everyone’s favorite boutique sales tax. The earmarking of taxes may be good for user-related taxes such as gasoline taxes or garbage or water fees, but it doesn’t make sense when the tax isn’t related to the service. Tying the hands of elected policymakers through earmarking means that in times when more needs to be spent on public safety or public health, the money can’t be used there. Instead, it’s strictly dedicated to $6 million zoo entrances or subsidizing symphony tickets, or expanding tourist facilities.
The proposal sounds like it would mainly result in building homes for the homeless, but more than half of the $7 million annual expenditure would be used to hire social workers.
If the county council wants to spend more on homelessness, perhaps they should do so out of existing revenues. Salt Lake County has plenty of our money already. The county has experienced huge tax growth between 1991 and 2000, showing average annual revenue growth of 8.2%.
Then there’s the argument about the proper role of government, which goes something like this: If it’s not morally correct for a citizen to go to his neighbors and demand that they contribute to his housing costs, it’s not appropriate for government to do the same thing on behalf of a group of citizens. We would all hopefully agree that as individuals we have a moral obligation to care for our less fortunate neighbors. There would be less agreement, however about whether government, or 51% of those voting on the issue, should take that choice from us by compelling charity. If it’s wrong for a homeless person to stand at the cash register and demand the 1/4 cent tax, it’s wrong for big brother to do it for him.
If we’re really concerned about the homeless, perhaps we should do more to remove the obstacles to a healthier economy so that the homeless can provide for themselves through better jobs. I will always remember noted Utah economist Kelly Matthews’ statement, that a good job is more important than any package of social benefits government can provide. Which brings me to the second issue the county council is grappling with — the utility franchise tax.
Utility Franchise Tax for the County
One of the most destructive things that could be done to Salt Lake County’s job market is the implementation of a utility franchise tax in the unincorporated areas of the county. Right now high energy users can locate their operations in the safe harbor of Salt Lake County’s unincorporated areas without paying the 6% utility franchise tax imposed by many cities. These high energy users don’t require much in the way of services, but they provide much-needed, and higher-than-average-paying jobs.
The council is considering whether to seek legislation to allow the county to impose this tax. They say they would reduce property taxes in the first year, dollar for dollar to offset revenues received from the franchise tax. However, there is no guarantee after the first year and, based on past history when the legislature has lowered taxes, the headroom created by the tax reduction by one entity creates a vacuum which is immediately filled through tax hikes from other agencies.
I cannot think of a worse tax than the utility franchise tax. It’s hidden from the consumer, and once enacted it has a life of its own, rising or falling on utility rate changes. Elected officials like this tax because once they enact it, it is on auto-pilot and they don’t have to take the heat ever again like they do with the property tax every year.
Some council members support the tax because the county municipal services district property tax rate is now higher than all cities in the county except Salt Lake City. This, they say, makes them look bad to citizens thinking of incorporating or annexing to adjacent cities because city property tax rates are lower due to their use of an additional revenue source in the franchise tax. Some also like it because it is collected on the utility bills of churches, schools, and government buildings which don’t pay property taxes, thus hiding the direct cost of government.
Let’s hope the county council maintains its good record by rejecting these two new taxes.