A new report outlines several years of research summarizing how water suppliers in eight Utah cities could phase out property taxes for water and in the process save millions of gallons of water, practically overnight.
Economists at the University of Utah created a model predicting how much water could be saved if these eight cities phased out the property tax for water. The table below shows the water savings for these cities as well as the average property tax refund that could be offered to each cities’ homeowners.
Phasing out property taxes for water is the simplest and easiest water conservation measure Utah water suppliers could take. Not only would removing water taxes be popular with taxpayers, it would save billions of dollars in government spending on water conveyance facilities and new water sources.
“Artificially depressing the price of this scarce resource through property tax collections only encourages water waste.” said Gabriel Lozada, Professor of Economics at the University of Utah who helped develop the model. “There is no reason not to embrace the free market when it comes to delivering water in Utah” said Lozada.The research also revealed that low-income families use just a small fraction of the water used by high income households yet they pay more water taxes than their actual use.
“I really was surprised when the data showed low income households subsidizing the green lawns of wealthy households” said Robin Rothfeder, a PhD student in the University of Utah’s City and Metropolitan Planning Department, who spent two years compiling data about water use in Salt Lake City. “It seems so straightforward that water payments should be based on how much water people use, but in Salt Lake, that simply isn't the case" said Rothfeder.
No other western state so widely collects property taxes to lower the price of water, which encourages people, businesses and government institutions to overuse and waste water. This widespread collection of property taxes for water is ironic because Utahns claim to embrace fiscal conservatism and because Utah is the 2nd most arid state in the U.S.
“Reducing Utah’s high water use by phasing out property taxes isn’t just about saving water,” said Zach Frankel, Executive Director of the Utah Rivers Council. “It’s about avoiding billions of dollars in unnecessary spending including both the $2 billion Lake Powell Pipeline and $2 billion Bear River development.”
Government water suppliers that collect these property taxes have worked hard to discourage the phasing out of these taxes, even though property taxes are widely hated by Utah taxpayers. Some government water suppliers even claim the price of water has no effect on water use, something widely contested by legions of economists across the United States. This is ironic because these government water agencies also claim to be doing everything they can to conserve water.
“Virtually all the opposition to phasing out these water taxes comes from the agencies who collect them” said Frankel. “How long are we supposed to ignore this obvious financial conflict of interest?”