Sales tax revenue essential for city services, infrastructure

Jul 20 2012 - 11:30am

"The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin."

-- Mark Twain

Driven by the need to provide residents with essential services and infrastructure, municipal government must deal with the reality of funding them. The necessity of the governing body to promote economic growth helps facilitate the community's quality-of-life expectations.

Responsibility to ensure that communities develop in an orderly manner and that residents have good access to retail and commercial services falls squarely on the shoulders of civic leadership. Still, providing these services and infrastructure projects is costly.

Economic development implies the general growth of an economy in terms of how much it produces and consumes.

While the long-term impacts of a vibrant local economy and providing necessary services and infrastructure are both important to cities, the immediacy of funding city-specific service and infrastructure needs can overshadow the more strategic concerns of securing high-paying jobs and attracting growing industries.

The University of Utah's Center for Public Policy and Administration says the primary sources of revenue for most cities and towns in Utah are the local property tax and the local sales tax.

In aggregate, property taxes generate 36 percent of local tax revenue and 20 percent of local general fund revenue. Sales taxes generate 43 percent of local tax revenue and 25 percent of local general fund revenue.

The sales tax is collected by the state, then distributed to communities.

Utah's formula for distributing the local sales tax is to give 50 percent of local sales tax revenues to the city where the sale was made, or the point of sale, and 50 percent to municipalities statewide, based on their proportion of the state population.

A point to be made is that goods generate sales tax, but services do not.

There are arguments against the current tax format. As a flat tax, it is regressive in nature, placing a greater burden on low-income families. Opponents also contend it is unfair to cities that cannot attract retail businesses.

Or is it? Will there be change in the future with the way online shopping is taxed?

Sales taxes diversify city revenues, and it is crucial that the governing body is responsible with the people's money.

Economic downturns are real, and there is significant value in not putting all your resources or reliance toward generating sales tax revenue.

Steve Curtis has worked as a business consultant and communication specialist. He is currently mayor of Layton. He can be reached at scurtis@laytoncity.org.

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