Thursday, October 15, 2015

Utah's Proposition 1--a tacit endorsement. Updated

What is it?

It is an increase in the sales tax in the state 1/4 of a percent to raise money for roads, buses, and trails. This is not a state-wide initiative, it is a by county ballot.  Meaning that if Salt Lake County passes it and Utah County does not then the tax will be raised in Salt Lake County, but not in Utah County.  Any county in the state can pass this tax, therefore the it can benefit every county in the state, not just the counties on the Wasatch Front.

The money raised will go into county coffers and not into state or federal coffers.  The money raised will not go to state or federal highways, but to county and city roads.  The money can also be used to improve buses, build commuter trains and build bike routes and pedestrian trails.

Economic effect.

Most of what you have read on other sites, both for and against this new tax are either lies or misrepresentations of the truth.  The economic effect will be mixed.  A sales tax does not take money out of your wallet.  It limits your buying power because your dollar at the supermarket will not go as far.  If you have 100 per week to spend on groceries, another 2.50 will go to taxes.  This means that you will have to find a way to cut back on your spending by 2.50 each week to cover the tax.  This will hurt retail outlets more directly than it will hurt consumers.

It will mostly hurt sales on big ticket items.  If your bank pre-approves you to spend 40,000 on a new car, you will have to get 1,000 less bling on it.  That will be 1,000 more for the state for a 40,000 vehicle.

Not all of the effects will be negative.  Utah has done well at maintaining state-funded and federal-funded roads, while many county and city roads go un-repaired.  Keeping these roads in good repair will attract more business, bring in more jobs, and provide more competition meaning that your employer will need to pay you more to keep you.  Then you probably can borrow another 1,000 on your car loan.  More bike and hiking trails will mean better health and less spent at healthcare facilities, which will give you more money to spend elsewhere.

Better roads and more buses and trains will also lead to better air quality.

I think that the net economic effect will be unnoticeable for most people.

Who will benefit most?

Companies that build and repair roads, highways, trains and buses will benefit the most from this bill.  College Students, many who do not own their vehicles, will benefit the most from improved public transportation.  The "working poor" will also benefit as they will have more options getting to and from work.  The street that you use on the way to church that sits right on the border between one city and other is more likely to get repaired.

Who will benefit the least?

Other than retailers, senior citizens who will still have to pay the tax on their purchases, but whose limited mobility prevents them from enjoying the new roads, buses, trains and trails are the ones with the least benefit.

Is it necessary?

Unfortunately, cars will continue to get more efficient and therefore, revenues from fuel taxes will continue go down.  This tax is meant to be a replacement for those funds.

Will it really be balanced?

Probably not.  Voters in the urban counties in the state are more likely to vote for it while voters in rural counties are more likely to vote against it.

Won't all of the money go to UTA?

The Utah Transit Authority operates in Box Elder, Davis, Morgan, Salt Lake, Tooele, Utah, Wasatch and Weber Counties only.  Other counties, like Cache County and Summit County have their own public transportation systems.  Money collected by this new tax will go to UTA, but not all of it.  And how it is spent is up to the discretion of the county.

In Utah County, there are plans for a BRT (Bus Rapid Transit) line east and west on University Parkway connecting BYU with the Orem Front Runner Station.  With the new tax, this could be a much safer and more efficient Trax line.  Think about that next time you are stuck on University Parkway after a barn-burner at LaVell Edwards Stadium.  The Trax Blue line master plan calls for it to be extended all the way to Utah Valley University.  That will not happen without more funding.  That may help parking at this burgeoning campus.

In Davis County, there are plans for a Trax line from Downtown Salt Lake all the way to the south gate of Hill Air Force base.  This may help keep Hill AFB open, as it makes downtown attractions easier for airmen stationed at HAFB to reach, especially on Sundays when Front Runner isn't operating.  And perhaps with little more funding, UTA will operate the big train on Sunday, at least on a limited basis, like between Clearfield and downtown and on General Conference weekends.  There is also a plan to connect Clearfield with Riverdale another Trax line, which will help traffic in that area during the afternoon rush.  Without this new tax, all that Davis County can allocate is enough for a BRT from Downtown Salt Lake to 500 S. Bountiful.

In Weber County there are plans to connect the Downtown Front Runner station with Weber State University.  That campus has a big parking problem and has for decades.  Giving students other options will help.

Some have endorsed this tax if UTA is left out.  But you can't really improve transportation without providing good alternatives to using your car.

Do we endorse this bill?

Unfortunately, we can't say no to every tax and expect our infrastructure to maintain itself.  You have to collect something.  There is no genie that will provide these things for you.

If your are going to tax people, sales taxes are progressive.  Meaning that they are one way to ensure that the wealthy pay more, but everybody pays some.  The way to avoid sales taxes is to not spend your money.  Not all sales taxes are paid by locals.  Visitor also pay sales taxes.  I hope that this tax will eventually lead to a reduction in property taxes.  That will probably not happen right away, if at all.

Fuel tax revenues will continue to decrease as we increase fuel efficiency on cars or find alternatives to driving.

Utah's sales tax rate is in the 3rd quartile of states in the US.  (We are 28th out of 50).  Most states have a higher sales tax rate that Utah, but four states (Delaware, Montana, New Hampshire and Oregon) have none. The average sales tax nationwide is just above 7%.  If this passes, the Salt Lake County Sales Tax will be 7.15%, and even higher in some communities.  If this does not pass in Utah County, the tax there will be 4.70%.  Passing it will still keep sales taxes below 5% in Utah County. Among the states that we border, Wyoming and Idaho have a lower sales tax rate while Nevada, Colorado, Arizona and New Mexico are higher.  In Arizona, sales taxes are 9.2%.  Tennessee has the highest sales tax at 9.45%.

I have problems with this proposal, but my concerns are not enough to make me vote against it.  I would like to see a uniform sales tax state-wide, instead of having lower taxes in some counties and higher taxes in others.  I may have to consider a trip to Mount Pleasant to buy my next car if this keeps up.  :-)  (Yes, I know it doesn't work that way, it's based upon residence.  But RC Willey should consider a store there.)

In Utah, I would like to see the state dump the sales tax on groceries, even if it means we pay a higher sales tax on other items.

I recommend voting for the proposal, but also recommend pressuring the state and county to lower property taxes and/or fuel taxes as well.  I also recommend having a sales tax holiday for the Friday in August after the 13th as kids are getting ready for school and purchasing new clothes and school supplies.

Update:

In Davis and Weber Counties, the proposition passed.  These counties will see more money for roads and other infrastructure as well as improved UTA bus service and possibly Trax.  The measure failed in Salt Lake and Utah counties.