[bouldercouncilhotline] Hotline: Head tax options

[cmosupport at bouldercolorado.gov]

Sender: Appelbaum, Matt


Colleagues – I thought I’d offer a few comments and concerns about the head tax as proposed in our agenda packet, and also put out a “straw man” proposal that fills in a few of the options:
 

1.     Our material notes that in the other metro cities, the rate for both employee and employer is the same.  In fact, Denver has a $5.75 monthly tax paid by the employee and a $4.00 tax paid by the employer ( a rate that has been effective since 1988).

2.     It’s interesting that our proposed rules, as well as those of Denver and Aurora (and probably others), not only exempt low-income employees from paying, but also exempt employers from paying their share for those same low-income employees.  I suppose the theory might be that a company with many low-income employees would be overly burdened if it had to pay for all employees, or that perhaps some/many of those low-income employees work only part-time (but they still need to get to their jobs).  However, if the goal of the head tax is to help mitigate impacts caused by employees and/or to provide those employees with benefits like a transit pass, then this seems a bit counterproductive.

3.     Denver seems to apply the head tax to employees, and their employers, if the employee works in Denver even if the business is located outside Denver.  In our proposed ordinance, P. 479, line 25, defines employee to broadly include anyone “as long as any part of such services are performed within the city.”  However, on P.480, line 10 and also line 14, it says that the tax is imposed for work “for a business located within the city, although on line 18 it appears to take the more expansive approach.  Not sure which one was intended, but I prefer Denver’s more expansive definition.

4.     Denver and others make it clear that if an employee has multiple jobs, that employee need only pay one head tax – although each employer must pay their share for that employee (assuming all other conditions are met).  I don’t see this in our draft ordinance, unless I just missed it.  (Note that this is not the same as when an employee works in Boulder and also in another city that has a head tax.)

5.     On P.479 in the section on Intent, it notes that the remainder of any revenues may be spent on anything by the city.  The ballot issue however specifies that the revenue must go to transportation expenses.  I think the Intent should reiterate that.  While I usually dislike earmarking, in this case the revenue does not come from a “general tax” but one applied only on employees, and so it is appropriate for that revenue to be earmarked for related expenses.

6.     I strongly agree with staff that the earmarking should be for transportation, not specifically Eco Passes (and I cannot support the ballot issue otherwise).  As noted in the
memo, there is far too much uncertainty regarding such passes for us to require funding them, no matter what.  In fact, staff understated the uncertainty, I think, especially regarding how much RTD will charge, and how the concept of passes might change significantly over time.  In addition, I find it completely unacceptable that RTD will require us to pay for any additional service needed because we “induce” demand via passes.  Really!??  So if we (or Denver, or any other city) charges for parking, or sets up parking districts, or otherwise nudges folks into using transit, we’d be liable for the “induced” demand?  Completely absurd.  Finally, there is the issue of whether there will, at some point, be some sort of countywide tax in order to provide passes for all residents; I assume it’s quite obvious that the city of Boulder would then find itself paying multiple times for the same passes, thus effectively paying for everyone else’s passes (and this isn’t so easy to resolve).  All that said, I think the concept of providing passes to all (if possible) employees in Boulder is a very good one, although we need to recognize that businesses currently providing such passes would no longer do so (since they’d otherwise be double-taxed).

7.     Regarding the exemption of the employer share for non-profits, I’ll be politically incorrect (as usual
) and suggest that these employers shouldn’t be exempt since their employees create the same impacts as any other employees.  I don’t think others will agree with me, but as with any such exemptions, it would be really nice to show them in the city budget since they have a real “cost.”

8.     Regarding the low-income exemption: I agree that we should use a number (much?) higher than that used by Denver, Aurora, and probably just about every other city that has such a tax.  The head tax will still be regressive – as is every single one of the taxes we are allowed to assess – but less so.  If we, for example, assume a tax rate of $4.00/month for a (non-low-income) employee, then an exemption level of $20,000/year yields an effective tax on that person’s (Boulder wages only; income from elsewhere or non-wages might increase the person’s total income) income of just under ¼ of 1 percent.

9.     Looking at the cost from the employer’s perspective, if one assumes that their average employee has wages of >$50,000 and that employers don’t pay anything for their low-income employees (unless we change that, as I’d prefer), then the employer’s cost/employee would be (much?) less than 1/10 of 1 percent of that employee’s wages.  Some have suggested that would be a reason for companies to leave Boulder, but looked at in that context, and relative to the very high lease rates here, I think such an outcome is quite unlikely (and obviously hasn’t had any impact whatsoever in booming Denver).
 
So here is a straw-man proposal that fills in some of the gaps in the agenda material and suggests a few changes:
·        Tax rates of $4.00/month for the employee share and $3.00/month for the employer share.  That might raise $5M/year, although I think we might be overestimating, and we’d also need to capture a very high share of the huge number of self-employed folks.
·        Exempt low-income employees who earn <$1700/month ($20,400/year).  This is a fixed amount, not linked to any wage metric that might change over time.

·        Require employers to pay their share for all employees, including low-income (yes, I know this is a stretch).

·        Apply Denver’s approach of taxing employees who work in Boulder even if their employer is located outside Boulder.

·        If an employee has multiple jobs subject to the employee share of the head tax, limit the tax to just one payment/month – but require each employer to pay its share for that employee.  Note that owners, partners, and proprietors would still need to pay their specific tax even if they also pay an employee tax (as stated in our draft ordinance).

·        Require non-profits to pay the employer share (yes, I know this is an even bigger stretch).

·        Make the Intent clear that the tax is earmarked for transportation purposes.  Fine with me if we say that the revenues should apply as much as possible to provide services for, and mitigate the impacts of, people who work in Boulder, including, most certainly, the provision of passes to those employees.
 
--Matt