Let's compare the taxes that run state and local governments to the average person's diet. Income taxes would be the meat, property taxes would be the vegetables and sales taxes would be the dessert.
Most people need a balanced meal to stay healthy, although some have been known to thrive quite nicely on mostly vegetables. Utah's governments, for example, were fiscal vegetarians until the Great Depression. In 1897, the year after statehood, property taxes accounted for 97 percent of state and local revenues.For many years, however, state and local leaders gradually have been trying to make dessert the main course. It's a popular idea. Who wouldn't want an emphasis on apple pie and hot fudge sundaes at every meal? But the shift toward sales taxes could prove troubling in the long run for the state's overall economic health. And, frankly, it isn't good for taxpayers, either.
A recent report by the Utah Foundation, a private nonprofit public service agency, charts the slide.
In 1965, the property tax made up 52.1 percent of revenues for state and local governments in Utah, with sales taxes coming in a distant second at 27 percent. Today the mix is much different. According to estimates cited in the report, property taxes in 1996 will make up only 27.7 percent of the total. The largest share, 36.8 percent, will come from sales taxes, while income taxes will make up 30.1 percent.
Looked at another way (one much more meaningful to the average person), the typical Utahn pays 2.8 percent of his or her personal income in property taxes today, compared with 4.9 percent in 1965.
Most would see this as a reason to applaud, and that is why stopping the slide will be so difficult. Politicians know how to make people happy. Whenever pollsters ask which levy is hated the most, property taxes always top the list.
The Utah Foundation believes this is due to the way the tax is collected each year, as well as to the way it has been administered. I have another theory. Property taxes are hated because they are the most naked and visible of all taxes. Every homeowner knows exactly how much he or she pays each year. The county sends a bill payable by the end of November with the inherent threat that the property eventually will be auctioned if payment isn't received.
But this is precisely why the property tax is the best of all levies for the taxpayer as well as for government. People tend to pay attention to the things they hate. The annual bill from the assessor gives them an idea of what government costs and forces them to make politicians more accountable.
Sales taxes and the surcharges attached to utility bills are much more hidden. If they came as a lump-sum bill each year, they would be hated, as well, but the people would better be able to monitor their leaders.
As far as governments are concerned, property taxes offer the most stable of revenue sources. They don't change much during hard times and, for the most part, they stay relatively stable during the good times.
In comparison, the revenue raised from sales taxes tends to fluctuate wildly depending on how well the economy is doing.
At the moment, state lawmakers feel pretty good about the $90 million property tax cut they passed last year. So good they want to cut another $100 million this year. Meanwhile, the Utah Association of Counties has proposed a property-tax cut in each county along with a cor-res-pond-ing increase in sales taxes.
The reasoning goes like this: Rural counties, in particular, want to find a way to make tourists pay for the cost of fixing roads and providing other services that visitors use. The sales tax seems a logical way to accomplish this.
I have no problem with that. Local governments ought to be granted the freedom to do as they see fit to cover their own needs. But I do have a problem with the overall shift away from property taxes. Somehow, the trend should be reversed toward a more balanced diet.
As the Utah Foundation notes, the healthiest governments tax consumption, through the sales tax; the ability to pay, through the income tax; and wealth, through the property tax.
If anything, the emphasis should be more on the vegetables and less on all the easier-to-swallow items.