November 3, 2006
This November, Utahns will be asked to vote YES or NO on several tax-related ballot questions. Statewide, taxpayers are being asked to vote on approximately twenty proposed tax increases. Some of the proposed property tax increases would fund general obligation bonds, which means that the tax increase is phased out when the bond is paid off, although some local governments try to raise operating levies when the bond levy is phased out. Others proposals – such as the sales tax increases in Utah and Salt Lake Counties for roads and transit – are permanent.
Approved property tax increases will be imposed on 2007 property tax bills.
Due to primary residential exemption, impact on homes will be 45% less than for businesses. Visit our blog at utahtaxpayer.blogspot.com to read about the impact of the primary residential exemption on taxpayers.
Taxpayers should be careful about claims made by some local governments with regards to proposed tax increases.
- Local governments frequently argue that the proposed property tax increase really isn’t a tax increase because it is “restoring” the tax rate to its previous level. However, since property values increase over time, increasing a tax rate to its previous level or maintaining it at its existing level means that property owners pay more taxes.
- Local governments sometimes try to increase operating levies while debt service levies are decreasing (due to bonds being paid off) and claim that this is not a tax increase. If local governments raise tax rates to issue bonds and then over time shift the increase to operating levies, then the tax rate is permanently ratcheted upward every time the city issues a new bond.
- Some local governments try to pass off a tax increase as a tax cut. For example, Box Elder School District claims that the owner of a $100,000 home in 1996 paid $360.14 in property taxes to the school district but would be paying $343.86 on a $100,000 home — $16.28 less – in 2006. However, the comparison is misleading because a home worth $100,000 in 1996 is worth a lot more in 2006.
- In an effort to convince voters to support its voted leeway increase, Washington County School District argues that Utah’s property tax per capita is significantly lower than the national average. However, the school district doesn’t mention that Utah’s other taxes and fees, including individual income taxes which are the primary funding source for education, are above the national average.
Utah has one the nation’s highest state/local tax and fee burdens. Visit www.utahtaxpayers.org and click on “How Utah Compares” to see our annual report on this issue.
Below, we have summarized the major proposals on the November 2006 ballot.
Constitutional Amendment Number 1 – Vote Yes
Two characteristics of an efficient tax system are low compliance costs and low enforcement costs as a percent of collected tax revenue, and that’s why the Utah Taxpayers Association supports amendment 1.
Passage of amendment 1 would allow the Utah Legislature to exempt tangible personal property that would generate an “inconsequential amount of revenue” if subject to property taxes. Currently, non-vehicular residential personal property is exempt from taxation, but business personal property is not exempt from taxation. Amendment 1 would allow the Legislature to exempt very small businesses from paying personal property taxes on items such as cell phones, computers, and furnishings.
The Legislature has already passed HB338 (Rep. John Dougall) which would exempt businesses with total personal property of less than $3,500. HB338 becomes effective if amendment 1 passes. Compared to enforcement and compliance costs, government receives very little revenue from collecting taxes on personal property owned by very small businesses.
The Utah Taxpayers Association is neutral on the following issues:
Salt Lake County
Salt Lake County will be asking voters to approve three ballot measures.
Proposition 1 – Voters will be asked to approve the issuance of $65 million in bonds to construct and renovate various recreational projects. There is no tax increase associated with these projects. The bonds will be paid using existing ZAP tax revenues.
Proposition 2 – Voters will be asked to approve $48 million in bonds to preserve open space. The tax impact on a $200,000 home would be $6.50 per year and $11.82 per year on a $200,000 business.
Proposition 3- Voters will be asked to approve a ¼ cent sales tax increase for transportation. If approved, the total sales tax rate in Salt Lake County will increase from 6.6% to 6.85%. The tax will raise an estimated $48 million per year to pay for transportation projects including roads, light rail, commuter rail, and corridor preservation.
Your taxpayers association was originally opposed to this proposal, but the Legislature implemented changes that benefit taxpayers. First, one-quarter of the increase will be used for preservation of transportation corridors. This is a wise use of tax dollars since the cost of land acquisition increases dramatically as development encroaches. By purchasing transportation corridors now before land prices escalate, taxpayers save money.
Second, the Legislature requires that governments in Salt Lake County implement a prioritization process that ranks each road and transit project based on the cost effectiveness of each project in reducing rush hour congestion. In recent years, the Legislature has required that all state road projects be prioritized based on cost effectiveness of addressing congestion. As a result of the September special session, the Legislature has extended the principle of prioritization to the 0.25% sales tax increase for mass transit and roads.
The impact on a median income, four-person family will be about $65 per year. (The official county estimate is overstated.)
Utah County 0.25% Sales Tax Increase
Utah County taxpayers are being asked to support a 0.25% sales tax increase to fund transportation projects. Of this increase, 87% will be used for commuter rail, 8% for road projects, and 5% for public transit. The tax is expected to raise about $16 million in its first year.
Proponents say the 0.25% sales tax hike will increase taxes per household by $97 per year. The association estimates that the tax increase for a typical median-income, four-person family will be closer to $65 per year.
Wasatch School District
The Wasatch School District will be asking voters to approve a $59.5 million bond to pay for the construction of a new high school. The tax impact of the proposed bond on a primary residence would be $78.32 per $100,000 and $143.32 per $100,000 on a business.
The Utah Taxpayers Association is concerned about the cost per student of the proposed new high school in Wasatch School District. Excluding land acquisition, fixtures, furnishings, and equipment, the proposed high school will cost approximately $30,000 to $33,000 per student. Alpine School District is building a high school in the Saratoga Springs area for approximately $21,000 per student. Construction costs should be measured on a per student basis instead of a per square foot basis because schools are intended to educate students, not square feet.
Alpine School District
The Alpine School district will be asking voters to approve a $230 million bond. The bond will be used to build a new high school, two new middle schools, and five new elementary schools. In addition, Orem High School will be rebuilt and Pleasant Grove, Lone Peak, and Mountain View High Schools will be expanded as will several elementary, junior high, and middle schools. The tax impact of the proposed bond on a $200,000 home is $24.86 per year and $45.20 on a $200,000 business.
The Alpine School District will be asking voters to approve a voted leeway to pay for operation costs on the new projects. The tax impact of the voted leeway on a $200,000 home will be $33.00 per year and $60.00 on a $200,000 business.
Juab School District $17.5 million bond and voted leeway
Juab School District taxpayers are being asked to vote on a $17.5 million bond and a voted leeway of 0.0004. The bond will be used to fund construction of a new Red Cliffs Elementary School, expansion of Mona Elementary School, and renovate the existing Red Cliffs Elementary.
The voted leeway would generate $250,000 annually and would be used to fund operational expenses of new school and maintain class sizes at existing levels. Estimated impact on $150,000 residence would be about $5 per year.
Box Elder School District voted leeway
Box Elder School District is asking voter approval for a 0.004 increase in the voted leeway. The impact per $100,000 valuation is $22 per primary residence and $40 per business.
The school district argues that additional revenue is needed to cover escalating energy, fuel, and health care costs. To its credit, BESD has consolidated fifteen elementary schools into twelve in recent years due to declining enrollment.
Washington School District voted leeway
The school district is asking voters to approve a 0.000500 increase in the voted leeway. The impact per $100,000 valuation will be $27.50 for primary residences and $50.00 for businesses. The district intends to use the additional revenue for reading intervention, gifted and talented programs, class size reduction, and teacher compensation.
Morgan School District
Morgan School District will be asking voters to approve a $25 million bond. The bond will be used to build a new elementary school, remodel an existing elementary school, and remodeling and updating the high school. The tax impact on a $200,000 dollar home would be $78.25 per year.
American Fork City
Taxpayers in American Fork will be voting on $46,950,000 bond which will cover the costs of building a secondary irrigation system. The bonds will be financed over 28 years and will be paid with impact fees and user fees. Property taxes will be used if revenues from impact fees and user fees are insufficient. Reliance on user fees for water development makes more sense than using general tax dollars because increasing user fees provides a financial incentive for users to conserve water.
Park City
For the third time since 1998, Park City taxpayers will be asked to support a tax increase for open space preservation. The proposed $20 million bond follows two bonds of $10 million each that were passed in 1998 and 2002. If the bond is passed, property tax rates will increase 0.000260, or $75.96 for a primary residence and $130.05 for a business or secondary residence.
| The Utah Taxpayers Association is a non-profit, non-partisan association advocating for lower taxes and sound tax policy. |
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