What are the impacts of a local employment tax on the Boulder economy?

Implications of the Findings

Boulder is a relatively competitive marketplace for business costs, with labor costs most significantly above peer communities. Therefore, a simplified assumption is that on the margin, an employment tax will likely be borne by the firm as it will not be able to pass tax on to either employees or final customers. Thus, the firm will actually have to pay both parts of the tax. This conclusion can be drawn based on the fact that most occupational wages are above market rate compared to other locations.

For approximately 21,000 of the jobs in Boulder (or 32.3%), firms will pay both portions of the tax. As an example, a $5/$5 tax on a firm with 500 employees will face an additional tax burden of $60,000 in operating costs to remain in Boulder. While this amount is relatively small for a firm of this size, given the higher costs for comparable labor and slightly higher rents to operate in Boulder, the competitive scales continue to tip against a firm operating in Boulder (producing similar products or services as a firm in another location). In all cases, the firm will bear the regressive cost of administration (reporting, collection, and payment)

The customer will likely bear the burden of this tax for firms that account for about 25% of the total employment, or approximately 16,000 jobs. Thus, local residents' retail, restaurant, and personal services costs will rise as the firm passes on the cost directly to local citizens and residents. While some portion of local customers may decide to shop outside of Boulder, the convenience and familiarity factors will likely influence most customers to pay the small increase in prices that would result. Yet in the long run, some retail erosion will occur due to the increased business costs being passed on.

Firms (with the remaining 28,000) jobs will pass the full burden of the tax on to their employees. These employees have generalized skills, which reduce their ability to have "power" in the marketplace. The tax would be passed directly onto to the employee through lower take-home wages. The ramifications on these employees' lower paychecks will result in higher demand for public services and programs, more remote housing options, and longer commute times. In the long run, these employees will seek employment in other locations to maximize take-home pay.