Economic Development

The Mother of All User Fees

Would you be happier paying taxes if you knew just what you were getting?
by | June 2006

Utah, of course, is far from the first place to find that the idea of overhauling the tax code is a lot simpler than the execution. If anything, tax reform is more difficult to achieve at the local level, where so many dollars are tied up by restrictions and mandates that come down from the state or the feds. "Everybody involved in public finance has that frustration about so many of our dollars being restricted," says Steve Marcotte, finance director of Tacoma, Washington.

That's one big reason why Marcotte's boss, city manager Eric Anderson, is pushing elected officials to rip up the Tacoma tax code and start over. Anderson's basic outline sounds simple. The city would tally up the cost of police, fire and libraries. After subtracting the revenues they produce by way of traffic tickets and other charges, the city would send each property owner a regular bill to pay for the services rendered. "Right now, it's hard to know the value," Anderson says. "Is my police department worth what I'm paying? Am I getting a good deal or a bad deal?"

It's an intriguing idea: Here is what things cost, and here's the bill. The basics of city government would be paid for like utilities. In exchange, Tacoma would give up its share of sales taxes and also eliminate its major business tax.

Anderson promoted this concept for years, without success, while city manager in Des Moines. He's gotten a little further in Tacoma, persuading the city council to set up a task force to offer a detailed plan this summer.

The task force has found the job tougher than it first sounded. For one thing, Anderson's plan would exempt churches but not other nonprofits. It may be only fair that these groups help pay for the city services they use, but that doesn't mean they're eager to start. "There will be quite a few nonprofits that will be violently opposed to it," says Mike Renner, a task force member who advises local nonprofits.

They won't be the only ones. Tacoma's deputy mayor, Mike Lonergan, calls the whole project "a massive undertaking that would drain the energy of our city, with little likelihood of success." He worries that if Anderson's plan were implemented, citizens might get into the habit of "voting" for their favorite expenditures, choosing to pay for, say, fire stations rather than libraries, even if libraries needed more help.

Even before getting to the political battles, the task force has struggled just in getting the numbers to add up. For instance, the state grants a 10-year property tax waiver to certain mixed-income housing developments. The city can't suddenly force them to participate in its new tax scheme. That's just one complication among many that threaten to tie up Anderson's seemingly simple idea.

Like countless other would-be reformers, Anderson may well find that the code is too complicated and contains too many opt-outs to overhaul without angering more people than the changes would please. In other words, the tax system may already be so broken that it can't be fixed.


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