Diversifying Municipal Revenue in Connecticut Report Prepared for the Connecticut Tax Study Panel Presentation November 17, 2015 David L. Sjoquist Professor of Economics Andrew Young School of Policy Studies Georgia State University Atlanta
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Diversifying Municipal Revenue in Connecticut Report Prepared for the Connecticut Tax Study Panel Presentation November 17, 2015 David L. Sjoquist Professor of Economics Andrew Young School of Policy Studies Georgia State University Atlanta, Georgia 30303 November 2015 Thanks go to Sally Wallace, Bill Fox, Mike Bell, and Daphne Kenyon for their comments on an earlier draft of this report, to Susan Sherman, Michael Galliher, Patrick Flaherty, and Dana Placzek for providing and explaining data used to estimate tax revenue, and to George Rafael, Daryl Jones, Darrell Hill, and Lyle Wray for help in understanding the issues associated with local revenue sources. Table of ContentsExecutive Summary 3 Current Environment 3 Arguments For and Against Local Revenue Diversification 3 Policy Option: Allow Local Sales Taxes 4 Options for Local Sales Taxes 4 Estimated Revenue 4 Economic Effects 5 Policy Option: Allow Local Income Taxes 6 Options for Local Income Taxes 6 Estimated Revenue 7 Economic Effects 8 Local Option Tax Design Issues 9 Policy Option: Increase Reliance on User Charges and Fees 10 Possible Reasons for Small Usage of Charges and Fees 10 Argument For and Against Charges and Fees 10 Estimates of Potential Revenue 11 Impact Fees 11 Policy Options for Increasing Charges and Fees 12 Introduction 13 Level of Revenue Diversification 14 Reasons for and against Diversifying Local Government Revenue 18 Arguments for Revenue Diversification 18 Capture Local Revenue Raising Capacity 18 Reduce Reliance on the Property Tax 19 Equity 19 Revenue Stability and Other Characteristics of Taxes 20 Economic Efficiency 21 Arguments against Revenue Diversification 21 Local Sales Taxes 22 Reliance on Local Sales Taxes 22 Local Sales Taxes in Selected States 23 Georgia 23 California 23 Utah 24
Tennessee 24 Designing a Local Sales Tax System 24 Sales Tax Base 25 Sales Tax Rate 25 Situs of Sales 25 Optional versus Mandated Sales Tax 26 Should a Referendum Be Required? 26 Who Should Administer the Local Sales Tax? 26 Use of the Revenue 27 Geographic Coverage 27 Economic Issues Associated with Local Sales Taxes 28 Incentive Effects 28 Revenue 29 Equity/Fairness 33 Fiscal Disparities 33 Summary Discussion Regarding Adopting a Local Sales Tax 34 Local Income Taxes 35 Reliance on Local Income Taxes 35 Local Income Taxes in Selected States 36 Ohio 36
Pennsylvania 36 Kentucky 37 Structuring a Local Income Tax System 37 Income Tax Base 37 Income Tax Rate 38 Optional versus Mandated Income Tax 38 Situs/Allocation of Revenue 38 Should a Referendum Be Required? 39 Who Should Administer the Local Income Tax? 40 Use of the Revenue 40 Geographic Coverage 40 Economic Issues Associated with Local Income Taxes 40 Incentive Effects 40 Revenue 41 Equity/Fairness 49 Fiscal Disparities 50 Summary Discussion Regarding Adopting a Local Income Tax 51 User Charges and Fees 52 Reliance on User Charges and Fees 52 Issues Associated with Current Charges 54 The Potential for Expanding the Use of Current Charges in Connecticut 55 Impact Fees 56 Summary Discussion of Charges and Fees 58 References 59 Appendix A. Notes on Revenue Data and Revenue Estimation. 64 Census Bureau Revenue Data 64 Herfindahl Index 64 Estimating Sales Tax Revenue 64 Estimating Income Tax Revenue 65 Appendix B. Appendix Tables 67 List of Tables
List of FiguresExecutive SummaryThis report considers revenue diversity among towns in Connecticut and provides an analysis of three policy options for increasing local revenue diversity: adoption of local sales taxes, adoption of local income taxes, and increases in fees and charges. Each of these could also reduce local government reliance on property taxes. There are other policies that could be adopted that would increase revenue diversity and/or reduce reliance on the property tax, for example, a state grant program for towns or a property tax circuit breaker. Consideration of these other options are beyond the scope of this report. Current EnvironmentTowns in Connecticut are not allowed to use local sales or local income taxes, and are second to the last among all states in terms of their relative reliance on user charges and fees. The result is that local governments in Connecticut have the least diverse revenue structure of any state, and consequently rely relatively more heavily on property taxes than other states. In 2012, 88.0 percent of local government own source revenues in Connecticut were derived from property tax revenue (the highest percent of any state). Local governments in Connecticut are second to last among all states in terms of their relative reliance on user charges and fees. Other states allow local governments to adopt local option taxes. As of 2012, local governments in 34 states relied on sales taxes. The reliance on local sales taxes varies; local sales tax revenue as a share of local tax revenue ranged from 1.6 percent to 48.5 percent. In 2012, local income taxes were imposed in 12 states; local income tax revenue as a share of local tax revenue ranged from less than one percent to 33.3 percent. Directory: wp-content -> uploads -> 2016 2016 -> 2017 afoCo Landmark Scholarship Program 2016 -> Instructions for the Preparation of Camera-Ready Contributions to the Conference Proceedings 2016 -> Step student Scholarships for Year 10-13 2016 -> The united church of canada 2016 -> Idan raichel biography – May 2016 Brief Producer, keyboardist, Lyricist, composer and Performer Idan Raichel 2016 -> An introduction to centre’s interventions expanding access to justice 2016 -> Sanchar Shakti 2016 -> Unit analysis should help here. We want number of bananas 2016 -> The Autobiography of Elder Joseph Bates 2016 -> The Great Heat and the Rhode Island Deep Water Bay Scallop (Argopecten irradians) Fishery 1875-1905 Download 1.02 Mb. Share with your friends:
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