Increased Urban Density Through Sales Tax Redistribution

By RJ, Peyton, Max, Elias

Problem�

Tax incentivizes are not aligned for municipalities to bring more housing density and additions to single- family units into their jurisdiction

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Because….

• Municipalities are highly incentivized to allow retail and industrial space over housing space. Sales taxes provide a disproportionate share of revenue for local govs.

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�27.54%

Of total Tax Revenue for Utah

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$4,457,544,041

Total 2023 Sales Tax Revenue for All Municipalities in Utah

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Current vs Proposed Tax Distribution in UT

• Current Utah sales tax distribution:
• 50-50 split between point of sale (retail) and the overall population of the area

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• Proposed changes to distribution of sales tax:
• 50-25-25 split between point of sale (retail), available housing units, and overall population of the area

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Implementation�of New Plan

Of sales tax revenue returns to the municipality of point of sale (a.k.a. no difference form status quo)

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50%

25% &

Of sales tax revenue is distributed based on population

25%

Of sales tax revenue is distributed based on available housing units.

How it works out

Municipalities of with a population of more than 15,000

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State will allocate sales tax revenue to municipalities with 50% going to retail, 25% to housing availability and 25% to net population in the area

Threshold #2

Threshold #1

Municipalities with a population of less than15,000 

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Municipalities under this threshold will stay at the current 50%-50% revenue split between

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Thesis

Thus, small towns won't be incentivized to create greater urban sprawl.

 This way we can structure policy to incentivize greater urban density and additions to single family units in already established urban areas

New Plan Example�$7.75 sales tax received on $100 item bought in downtown SLC�

Point of Sale

$3.88

(50% of $7.75)

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Population %

$.2279

(50% of $7.75)*5.88%

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$0.1139

(25% of $7.75)*5.88% (i.e. SLC % of Utah tot. population)

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$3.88

(50% of $7.75)

Housing Units

$0.00

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$0.1802

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(25% of $7.75)*9.30% SLC’s percentage of available housing units divided by total in UT

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Total Revenue:

$4.11

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$4.17

Revenue received by SLC from this transaction

New Plan

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Old Plan

Value Add

• Municipalities are incentivized to bring more housing density and additions to single- family units
• Increased collaboration between municipalities and developers
• More options for affordable housing such as ADUs, duplexes, and multi-family housing

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Summary

Incentivizing municipalities and cities to increase housing density and additions to single-family units through redistribution of sales tax revenue provides a win-win situation with increased revenue for municipalities and for greater opportunities available for developers