The Salinas Utility Users Tax: Necessary Revenue Source or Government Waste?

Publication Date: October 2002

Publisher: Reason Foundation

Author(s): Adam B. Summers; Geoffrey F. Segal

Research Area: Economics

Type: Report

Coverage: California

Abstract:

This November, citizens of the city of Salinas, California will go to the polls to decide, among other things, on Measure O, an initiative to repeal the city's utility users tax over a three-year period. Proponents claim that the utility users tax is another unnecessary tax, particularly in the wake of the state's energy crisis, which generated greater-than-expected revenue due to inflated energy prices, and that the city need only be more responsible and efficient in its management of city services to maintain current service levels. Opponents claim that the tax repeal will eliminate needed revenue and that the city will have to significantly scale back services as a result. This study analyzes the underlying assumptions of both sides and demonstrates that through contracting out and privatization the city can obtain the best of both worlds' relief for taxpayers through the abolition of the utility users tax and the maintenance of (or even increase in) the quality and quantity of city services made possible by cost savings and increased competition.