commuter tax analysis

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COMMUTER TAX

SALT LAKE CITY

CORPORATION

COLLEGE OF ARCHITECTURE AND PLANNING:

CITY AND METROPOLITAN ECONOMICS

PREPARED BY: JIM SPUNG

NOVEMBER 11, 2012

Challenges Facing Salt Lake City:Should a Commuter Tax beImplemented?

EXECUTIVE SUMMARY

Salt Lake City welcomes thousands of tourists, students, and commuters everyday increasing the

daytime population from 184,660 to approximately 328,309 (not including students and tourists).

Providing public safety and emergency response services for this large daytime population presents

signicant challenges because those services are largely paid for by the Citys stable resident base. In

addition, some 54% of the land in Salt Lake City is non-taxable and the largest employers in Salt Lake

City are nontaxable entities including the University of Utah, the State of Utah, the LDS Church and

Salt Lake County Government (Mayors Recommended Budget, A-11& 12).

Given this inux in daytime population, the point-of-sale sales tax generated by these non-resident

workers does not cover the cost for the necessary services. Salt Lake City spends approximately $280.00

Salt Lake City welcomes thousands

of commuters everyday increasing

the daytime population from

184 660 i l 328 309


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y y p pp y184 660 t i t l 328 309


CITY AND METROPOLITAN ECONOMICSCOMMUTER TAX

INTRODUCTION

More than 3/4 of Salt Lake City workers do not

live in Salt Lake City (see Graph 1); subsequently

Salt Lake Citys daytime population increases by

185,026 people excluding tourists and students

(Mayors Recommended Budget, A-4). is

increase in daytime population places a strain on

the Citys public safety and emergency responseinfrastructure and sta which are maintained

to protect a population of 315,000. is equates

to 1.4 police o cers per 1,000 people (during

daytime hours), or 2.4 police o cers per 1,000

permanent residents. Other Salt Lake County

cities maintain an average of 1.2 police o cers per

1,000 permanent residents, nearly half as many.

is higher average number of police o cers

is necessary in order to serve and protect the

signicantly increased daytime population. e

magnitude of this challenge is illustrated by the

fact that approximately 50% of victims of crime

committed within Salt Lake City are not city

residents and approximately 50% of perpetrators of

crimes committed within Salt Lake City are not cityresidents. It is also worth mentioning, that the Fire

Department maintains an average of 2 reghters

per 1,000 permanent residents while other Salt Lake

revenue. is reduction in revenue necessitated

large cuts to operations, programs and personnel;

however the City must maintain its level of service

without exceeding the adopted budget (Mayors

Recommended Budget, A-11&12).

e next section of this policy brief will analyzein greater detail who is working in Salt Lake City,

i.e. their age, where they reside, and their income.

is information will help one to understand what

solutions are viable for this problem.

Salt Lake City spends nearly

$280.00 per non-resident per

year to maintain the level of

service expected by citizens and

visitors; which adds up to nearly

$40,221,720 dollars per year


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COLLEGE OF ARCHITECTURE AND PLANNING:CITY AND METROPOLITAN ECONOMICS

COMMUTER TAX

to the rest of the Salt Lake Valley (See Graph 3 on

page 4).

e reason so many workers commute from

southern cities is because of the jobs/housing

imbalance which exists in so many of the Salt

Lake Valleys bedroom communities. For example,

there are 47,963 workers living in West Jordanhowever there are only 24,299 jobs in West Jordan.

is equates to 0.5 jobs per working resident,

contrasted to Salt Lake Citys 2.8 jobs per working

resident. It seems nearly all those living in suburban

communities do not have the opportunity to work

in their own community because there simply

are not enough jobs; therefore it is necessary they

commute where the jobs are located. Employment

sectors must also be considered, as many who livein the suburbs may be specialized in a skill that

is dominantly in a larger city. ough improving

the jobs/housing balance would help improve the

situation, it does not entirely eliminate non-resident

workers, as there will always be workers who travel

outside their city limits for employment.

In contrast, Salt Lake City has an abundant numberof jobs, given the current resident population,

and needs more housing. is would allow more

workers to live in Salt Lake City, and ultimately

closer to their place of employment. More housing

would also increase the property tax and sales tax

revenue for Salt Lake City, both of which would

help alleviate the current problem of an abundance

of non-resident workers in Salt Lake City.

Given this information, the best approach for Salt

k d d f bl f

ough a better jobs/housing

balance is a long-term solution,

implementing a commuter tax

seems to be themost viable short-

term solution.

13,533

45,021

11,361

20,033

106,019

22,462

5,288

31,463

7,554

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

LIVE IN BUT DON'T WORK IN SLC WORK IN BUT DON'T LIVE IN SLC LIVE AND WORK IN SLC

NumberandPercentShare

ofWorkers

16-29 yrs.

30-54 yrs.

55+ yrs.

34.8%

51.6%

13.6%

24.7%

58.1%

17.2%

27.5%

54.3%

18.3%

Graph 2: Resident and Non-Resident Workers by Age in Salt Lake City (2010 U.S.

Census).


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the city will benet from such a tax.

e commuter tax option is designed to be

an e cient taxing policy, or in other words,

those earning more income will contribute

proportionately more than those earning less (See

Table 1 on page 5). As shown in Table 1, non-resident workers in the lower income brackets will

contribute a smaller share of their income towards

the tax while those earning more will contribute

a larger share. In any regard, the tax will be very

small, and may be classied as a perfect tax, or

one in which behavior of those taxed does not

change. is is because the tax will be at most

0.45% of ones wages, almost negligible relativeto ones total income. e maximum amount one

would be taxed in the higher income bracket would

be $45.00/month or $540.00/year. e lowest

amount one would be taxed in the lower income

brackets (assuming they make $200.00/month or

more) would be $0.60/month or $7.20/ year.

is tax structure is estimated to generate between

$27,442,864.80 and $64,162,836.00 in revenue for

the city. e smaller gure assumes all workers

t th l t d f th i ti

For statistical purposes, let us assume each

workers wages fall in the middle of their respective

earning brackets. is still provides the City with

$36,719,971.20 in revenue, only $3,501,748.80 shy

of completely covering the expense of providingservices for non-resident workers. is is a

substantial improvement compared to what the

City is currently spending.


CITY AND METROPOLITAN ECONOMICSCOMMUTER TAX

It is safe to assume the tax revenue

generated from the commuter tax

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

75,000

80,000

NORTH NORTH EAST EAST SOUTH EAST SOUTH SOUTH WEST WEST NORTH WEST

NumberandPercentShareo

fSaltLakeCityWorkers

18.7%

3.1%

5.6%

13.6%

35.3%

4.1%

16.3%

3.2%

THE COMMUTER TAX

Graph 4: Direction Workers Live From eir Job in Salt Lake City (2010 U.S. Census).


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In closing, it is important to address the issue that

Salt Lake City face. e City provides services to

non-resident workers; which increases its cost of

government. e best solution to this problem is

long-term; which entails providing more housing

within city limits for workers and their families.

is would increase property values, increase salestax, as well as eliminate the need to raise taxes on

current residents or impose a commuter tax on

non-resident workers. In a sense the City would

be converting those non-resident workers in to

resident workers. ough steps can be taken to

modify zoning ordinances, density requirements,

and other land use policies to allow for more

housing; the best short-term solution is adopting

a commuter tax. is tax would be progressive in

nature and would only tax non-resident workers

wages between 0.25% and 0.45%. is tax is

projected to pay entirely for the extra services

the City provides (and possibly generate surplus

revenue for the City) without placing a signicant

burden on non-resident workers.

COLLEGE OF ARCHITECTURE AND PLANNING:CITY AND METROPOLITAN ECONOMICS

COMMUTER TAX

ough steps can be taken to

modify zoning ordinances, density

requirements, and other land use

policies to allow for more housing;

the best short-term solution is

adopting a commuter tax.

CONCLUSION

200.00$ to 1,250.00$ 7,279,000.00$ to 45,493,750.00$ 0.15% to 0.25% 0.30$ to 3.10$ 7.20$ to 74.40$ 262,044.00$ to 2,707,788.00$

t t t t t t

TOTAL ANNUAL TAX REVENUEWORKER MONTHLY INCOME TOTAL WORKFORCE INCOME % TAX ON WAGEDEDUCTED BI-

WEEKLY/WORKER

AMOUNT DEDUCTED

ANNUALLY/WORKER

Nelson, Aurthor C. 2012, Power Point Lectures

Presented in CMP 6322 Fall 2012. Downloaded

from e University of Utah Canvas Website Fall

2012, CMP 6322.

Ulbrich, Holly. 1989, Public Finance: In eory and

Practice; Chapters 11, 12. Downloaded from eUniversity of Utah Canvas Website Fall 2012,

CMP 6322

APPENDIX

e following pages contain larger graphs and

charts which illustrate the data explained in this

policy brief.


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0

5,000

10,000

15,000

20,000

25,000

30,000

35,000


NUMBEROFJO

BS

Less than 10 miles

10 to 24 miles

25 to 50 miles

Greater than 50 miles

DISTANCE AND DIRECTION SALT LAKE CITY WORKERS

LIVE FROM THEIR JOB: 2010 CENSUS


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186,440

223,880

41,377

182,503

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

220,000

240,000

Total # of Salt Lake City

Residents

Work in Salt Lake City Work & Live in Salt Lake City Work In But Do Not Live in

Salt Lake City

NUMBEROFWOR

KERS

NUMBER OF RESIDENT AND NON-RESIDENT WORKERS IN

SALT LAKE CITY BY COUNT AND PERCENT: 2010 CENSUS

100%

18.5%

81.5%


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13,533

45,021

11,361

20,033

106,019

22,462

5,288

31,463

7,554

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000


NumberandPercentSha

reofWorkers

16-29 yrs.

30-54 yrs.

55+ yrs.

RESIDENT AND NON-RESIDENT WORKERS BY AGE IN SALT

LAKE CITY: 2010 CENSUS

34.8%

51.6%

13.6%

24.7%

58.1%

17.2%

27.5%

54.3%

18.3%


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11,931

36,395

10,660

16,031

66,073

15,370

10,892

80,035

15,347

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000


$1 to $1,250 per month

$1,251 to $3,333 per month

$3,333 or more per month

EARNINGS OF RESIDENT AND NON-RESIDENT WORKERS BY COUNT AND

PERCENTAGE IN SALT LAKE CITY: 2010 CENSUS

30.7%41.3%

28.0%

19.9%

32.6%

43.9%

25.8%37.1% 37.1%


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223,880

62,203

41,750 39,619

31,876

24,299 23,113 20,896 19,69716,623

84,929

0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

250,000

Salt Lake City West Valley

City

Sandy Murray South Salt

Lake

West Jordan Millcreek

CDP, UT

Draper

(Partial)

Taylorsville Cottonwood

Heights

Other Places

NUMBER OF JOBS BY CITY IN THE SALT LAKE

METROPOLITAN AREA: 2010 CENSUS


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80,231

52,615

47,963

43,690

29,594 28,372

21,951 21,537

16,856 16,708

128,258

0

25,000

50,000

75,000

100,000

125,000

150,000

Salt Lake City West Valley

City

West Jordan Sandy Taylorsville Millcreek

CDP, UT

Murray South Jordan Riverton Cottonwood

Heights

Other Places

WORKERS BY CITY IN THE SALT LAKE

METROPOLITAN AREA: 2010 CENSUS


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0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

75,000

80,000


N

umberandPercentShareofSalt

LakeCityWorkers

DIRECTION WORKERS LIVE FROM THEIR JOB IN SALT LAKE CITY :

2010 CENSUS

18.7%

3.1%

5.6%

13.6%

35.3%

4.1%

16.3%

3.2%


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200.00$ to 1,250.00$ 7,279,000.00$ to 45,493,750.00$ 0.15% to 0.25% 0.30$ to 3.10$ 7.20$ to 74.40$ 262,044.00$ to 2,707,788.00$

1,251.00$ to 3,333.00$ 82,657,323.00$ to 220,221,309.00$ 0.25% to 0.35% 3.15$ to 11.50$ 75.60$ to 276.00$ 4,995,118.80$ to 18,236,148.00$3,334.00$ to 5,000.00$ 266,836,690.00$ to 400,175,000.00$ 0.35% to 0.45% 11.55$ to 22.50$ 277.20$ to 540.00$ 22,185,702.00$ to 43,218,900.00$

TOTAL 356,773,013.00$ to 665,890,059.00$ 27,442,864.80$ to 64,162,836.00$

TOTAL ANNUAL TAX REVENUEWORKER MONTHLY INCOME TOTAL WORKFORCE INCOME % TAX ON WAGEDEDUCTED BI-

WEEKLY/WORKER

AMOUNT DEDUCTED

ANNUALLY/WORKER

commuter tax analysis

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