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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
COLLEGE OF ARCHITECTURE AND PLANNING:
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.
COLLEGE OF ARCHITECTURE AND PLANNING:
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
NORTH NORTH EAST EAST SOUTH EAST SOUTH SOUTH WEST WEST NORTH WEST
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
LIVE IN BUT DON'T WORK IN SLC WORK IN BUT DON'T LIVE IN SLC LIVE AND WORK IN SLC
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
LIVE IN BUT DON'T WORK IN SLC WORK IN BUT DON'T LIVE IN SLC LIVE AND WORK IN SLC
$1 to $1,250 per month
$1,251 to $3,333 per month
$3,333 or more per month
EARNINGS OF RESIDENT AND NON-RESIDENT WORKERS BY COUNT AND
PERCENTAGE IN SALT LAKE CITY: 2010 CENSUS
30.7%41.3%
28.0%
19.9%
32.6%
43.9%
25.8%37.1% 37.1%
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223,880
62,203
41,750 39,619
31,876
24,299 23,113 20,896 19,69716,623
84,929
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
225,000
250,000
Salt Lake City West Valley
City
Sandy Murray South Salt
Lake
West Jordan Millcreek
CDP, UT
Draper
(Partial)
Taylorsville Cottonwood
Heights
Other Places
NUMBER OF JOBS BY CITY IN THE SALT LAKE
METROPOLITAN AREA: 2010 CENSUS
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80,231
52,615
47,963
43,690
29,594 28,372
21,951 21,537
16,856 16,708
128,258
0
25,000
50,000
75,000
100,000
125,000
150,000
Salt Lake City West Valley
City
West Jordan Sandy Taylorsville Millcreek
CDP, UT
Murray South Jordan Riverton Cottonwood
Heights
Other Places
WORKERS BY CITY IN THE SALT LAKE
METROPOLITAN AREA: 2010 CENSUS
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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
70,000
75,000
80,000
NORTH NORTH EAST EAST SOUTH EAST SOUTH SOUTH WEST WEST NORTH WEST
N
umberandPercentShareofSalt
LakeCityWorkers
DIRECTION WORKERS LIVE FROM THEIR JOB IN SALT LAKE CITY :
2010 CENSUS
18.7%
3.1%
5.6%
13.6%
35.3%
4.1%
16.3%
3.2%
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200.00$ 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