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Fees + Taxes = Double Taxation?

Today's Deseret Morning News reports on the increased reliance on entrance fees to fund national and state parks. One of the persons quoted in the article suggested that having to pay taxes and fees is the same as paying twice.

We've heard the same argument with regards to congestion pricing. Such "paying twice" or "double taxation" reasoning leads to some very interesting conclusions.

For example, should cities stop sending residents monthly water bills because federal taxes, state sales taxes, and local property taxes are used to fund water projects?

Should the state eliminate the gas tax (really a user fee) because state and local general sales tax dollars and local property tax dollars are used to fund roads?

Should the state stop charging for lunches in public schools because federal taxes and state liquor taxes are used to fund school nutrition programs?

It's fairly obvious to most people that if government were to eliminate these fees that general taxes would have to be raised elsewhere or government programs would have to be streamlined (including those that were being funded in part by fees).

However, the real question to those who argue that these fees are double taxation is why do government services have to be either 100% funded by general taxes or 100% funded by fees but not a combination of both?

Reliance on user fees makes sense in many instances, particularly if user fees encourage personal responsibility and more efficient use of resources.

We've been getting away with a 'steal' for years as regards what we are charged to enter National Parks and Monuments.

Now, as to whether a governmental entity has the ability or the incentive to provide an efficient product or service--that is 'a whole nother story.'

In general, what I've seen is Republicans pushing for more fees rather than taxes. You pointed out some of the positives regarding this approach, but the fact that fees may exclude some people from some services that they already help fund through their tax revenues seems a little one-sided.

Also, politicians who have relied heavily on fee increases have a tendency to proclaim from every roof-top during re-election time, that they haven't increased taxes. Though technically right, it is quite misleading. Particularly if they cut taxes and made up the difference with fee increases.

Unfortunately, the public doesn't seem to understand how this works and actually believe they are voting for a fiscal conservative, when in reality, they are voting for someone who has expanded government, but funded it by other means.

Obi wan,

You are absolutely right about the connection between raising fees to avoid raising taxes. Fees, which are sometimes more preferable to general taxes, are still a form of taxation. When we annually calculate Utah's state and local tax burden, we include several measures, including taxes AND fees.

Even though we strongly support increased reliance on fees for water and transportation, we would still include these fees as part of the state/local tax and fee burden.

oI agree that fees should be included in the overall tax burden. Where fee analysis struggles is determining the distribution of the tax burden.

Since fees are generally lump-sum payments made by those who use governmental services, I would expect that moving from taxes to fees in general makes Utah's tax structure more regressive relative to income. It is pretty straightforward to analyze the amount of income tax paid, or the amount of deduction taken for real estate taxes deducted relative to adjusted gross income. It's harder to evaluate the burden relative to income for fees.

Some fees are regressive, but not all, at least they don't have to be.

Water fees, for example, could be progressive if a certain base amount of usage -- enough to cover necessities such as cooking et al -- is charged at a lower rate. Those with large yards and lots of outside watering would pay higher water bills.

Since low income households car pool more than higher income households, transportation fees such as congestion pricing are probably less regressive than sales taxes, and sales tax increases have, unfortunately,been the Legislature's method for funding roads and rails.

Going back to your previous comment about politicians using fees to avoid raising taxes, local option sales tax increases for roads and rails accomplishes the same thing. By increasing local sales tax authority for transportation, the legislators can tell their constituents that they didn't raise taxes.

Of course, when the voters are given only two choices -- raise sales taxes or deal with more congestion -- it's not surprising that they vote for higher taxes.

Utahns of all income groups will have lower tax AND fee burdens if the legislature would start moving forward on congestion pricing. Congestion pricing is no silver bullet, but it would do a lot more to relieve congestion and cost a lot less than what the state is doing right now, which is to ask local voters to increase sales taxes by 0.25% every five to ten years.

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