Tax systems do matter

Utah cities rely a lot on sales taxes. That isn't by accident, nor is it anything other than representative government at work. The other large source of municipal income, the property tax, is generally hated more than any other tax.

But changing the mix would lead to consequences. The way cities fund themselves has a lot to do with economic development, planning and zoning.

These are some of the things that emerged in a report released this week by the Utah Foundation and the University of Utah's Center for Public Policy & Administration. If nothing else, the report offers an interesting look at why cities do what they do to attract business, and why businesses themselves decide where to locate. (The report is at www.utahfoundation.org.)

Oddly, big taxpayer funded sports stadiums, such as Sandy's new soccer facility, weren't listed as factors for business locations. However, a city's overall characteristics, including its size and geography, were. So were things such as transportation systems and the strength of a city's general plan.

The study was based on focus groups and interviews with local, state and business officials. A lot of its information could be termed intuitive, but there were some thought-provoking tidbits.

Tax policies do influence economic development. Utah's reliance on the sales tax gives cities an incentive to attract retailers, rather than high-paying jobs that could be termed real economic development. Suburbs, for instance, may offer tax breaks to lure Wal-Mart from a neighboring suburb just to get more sales tax money.

The Legislature has tried to reduce this incentive somewhat by allowing cities to keep only 50 percent of the sales taxes generated within their borders. The rest is distributed based on population.

But there is another, more practical side to this equation. City officials generally understand that incentives alone won't attract retail. They need a sizeable daytime population — i.e. workers in good-paying jobs — and a lot of well-to-do residents, as well.

Utah's cities rely on sales taxes for 43 percent of their income, and property taxes for 36 percent. The rest comes from a variety of sources. Any change to that mix would have consequences. An equal mix seems the best course, along with constant reminders to city leaders about what does and doesn't work to attract jobs.