Sales tax increases such as those proposed in Turlock and Oakdale have become increasingly necessary for local governments. Across the state, there are a record 46 on the ballot this November – perhaps demonstrating their importance.
Knowing that, we think the strategy of relying on sales taxes to fund civic services and priorities is risky and ultimately counterproductive.
We have the usual concerns: sales taxes take a higher percentage of income from poor people and those with large families than from wealthier individuals; local retail sales are falling as the population ages and others shop online; becoming dependent on sales taxes pushes officials to seek out more storefronts rather than other job generators. Worse, in trying to get big-box retailers to locate in their boundaries, cities are ultimately tempted to cut sweetheart deals or provide sales tax rebates – hurting existing businesses. And when newer stores in other cities lure away those customers, the cities are worse off than before.
Such concerns can become trivial in the minds of public officials when faced with laying off cops or closing firehouses or fixing dilapidated infrastructure. We get that, which is one reason we support measures B and Y. We’re happy that each of those measures – like virtually every other sales tax measures – includes a “sunset rule,” promising voters the tax will end … someday.
But just as the sun rarely sets during an Alaskan summer, it also rarely sets on a sales tax increase. We would prefer a “lights out” rule that turns off the extra tax once its goals are reached.
Consider: In their arguments for their tax measures, both Oakdale and Turlock noted specific revenue targets so they could do specific things – hire more public safety staff and fix potholes. But if more stores are built in each town, and more shoppers spend more money, the cities would reap sales tax windfalls hauling in extra cash. Residents would have done their parts, but they would still be paying the extra sales tax.
We suggest creating targets. If a city needs $10 million, and is on pace to collect 75 percent of that by a certain milestone – say June 1 – then cut the extra tax in half for the final quarter. If all the tax has been collected by Sept. 1, let it vanish for the balance of the year and resume the next.
It might not happen very often, but think how popular city officials would be when it did.
The Board of Equalization, which collects California taxes, has no rules against it. It requires a 110-day notice before a tax rate is changed, so the last milestone would have to occur by early September. But those are details.
As the recession hangs on in our Valley, local governments are faced with real dilemmas and have few alternatives for confronting them. A sales tax increase is often the best way. But let’s look for ways to make it as palatable as possible.