Vail tax proposal: Guests pay two-thirds of it
Analysis: A worker making $15 per hour will pay an extra $14 per year
Voters have to approve tax increases in Colorado. Voters tend to favor taxes someone else pays. That’s not the case with Vail’s Ballot Issue 2A, but it’s close.
Denver-based Economic Planning Systems has done economic analysis work for Vail over a year. A 2019 study conducted for the Vail Local Housing Authority was the basis for recent work on the impact of the ballot proposal to raise the town’s sales tax 0.5%.
The proposed increase would not apply to grocery food sales but to all other purchases.
Andrew Knudtsen, managing principal of Economic Planning Systems, said the idea behind this work was to provide “current, solid economic data” on who would pay most of the increase, estimated to raise about $4 million in its first year.
Knudtsen said the spending analysis is based on U.S. Census data on retail trade. Estimates on spending are based on hourly wages converted to annual income. That step leads to an analysis of the percentage of annual income spent on retail goods. Other economic data estimates how much of that spending is done in a community versus spending in other communities and online.
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Spending in Vail includes money spent in bars and restaurants, on health and beauty services, and liquor and some retail goods, including equipment and clothing. The number also includes spending on home improvement.
While Vail has just one hardware store — the Ace Hardware in West Vail — Knudtsen noted the store is always busy.
Using that data, Knudtsen’s firm determined that a full-time employee making $15 per hour would spend, on average, an extra $14 per year if the tax increase is passed.
Someone making $35 per hour — an annual income of nearly $73,000 — would pay an extra $33 per year.
In addition to the data about local residents, Knudtsen’s firm also estimated the share of the tax that would be paid by guests. To do that, the firm examined tax collections by month for the past five years. Tax collections during shoulder seasons were used as a baseline for local spending. Measuring that baseline versus seasonal collections provides a breakdown of how much of the town’s sales tax comes from guests. The study showed guests make up about 67% of Vail’s sales tax revenue.
Vail Local Housing Authority Chairman Steve Lindstrom, a ballot-issue supporter, said the group asked Knudtsen’s firm to take a second look at its data from 2019 to evaluate spending and the breakdown between guests and residents.
While little in the current data was surprising, Lindstrom said the resident-guest split wasn’t known.
Lindstrom said the point of the extra work by Economic Planning Systems was to provide hard numbers to voters.
“You hear various things — people saying, ‘Why are you putting this on locals?’” Lindstrom said.
In his view, “Everybody’s being asked to pay something. We just wanted to get some hard numbers out there.”
According to a report by Economic Planning Systems, here’s the annual impact of Vail’s proposed sales tax increase at various income levels.
$15 per hour: The increase would cost on average an extra $14 per year.
$25 per hour: The increase would cost on average an extra $24 per year.
$30 per hour: The increase would cost on average an extra $29 per year.
$35 per hour: The increase would cost on average an extra $33 per year.
Source: Economic Planning Systems