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They're hearing a familiar song in Grand Junction from Reford Theobold, who serves on the city council there. He'd like to increase the local sales tax, and use the increased revenue to eliminate to eliminate the city's property tax.
As it is, the sales tax in Grand Junction is 7.75 percent: 2 percent for Mesa County, 3 percent to the state and 2.75 percent to the city. Raising that 2.75 percent to 3 percent would bring in an additional $2.13 million a year, which could effectively replace the $2.57 million now raised by Grand Junction's mill levy.
As Theobold puts it, I want the voters to decide.
Property tax is the most regressive tax. And our sales tax
here is paid mostly by non-residents of Grand
Junction.
He said that only 40 percent of sales-tax revenues come from city residents. The rest splits evenly between tourists and out-of-town shoppers.
That sounds appealing -- get rid of a regressive tax (the usual definition of a regressive tax is that the poor pay a higher proportionate rate than the rich do) and replace it with fairer tax that other people pay most of. Who could oppose that?
But just how is the property tax more regressive than the sales tax?
Property taxes, by definition, fall more heavily on people who own property -- and the poor don't own much real estate.
Sales taxes, on the other hand, are collected on items that poor people buy, like food (the state exempts food, but many local governments don't), shelter (if you rent by the week at some kitchenette motel because you can't afford the deposit on an apartment) and clothing. Sales taxes are not collected on real-estate options, water-right transfers, junk bonds, senators and many other items that the poor don't purchase.
Further, the well-connected can arrange sales-tax exemptions (billionaire Phil Anschutz got one on locomotive parts so as to save railroad jobs in Colorado -- there's a real knee-slapper) and property-tax abatements (frequently offered to corporations interested in relocating). So I can't see how one tax is necessarily more regressive than the other.
The other part of Theobold's argument -- let's raise the sales tax because outsiders pay most of it anyway -- has some troubling consequences.
Municipal governments can be as entrepreneurial as any aggressive private enterprise. They want to maximize revenues and minimize costs. Residents cost money to serve, and if what Theobold says is true, revenues don't come from residents.
Thus the city government moves to serve the interests of its revenue stream, rather than the interests of its residents.
Cities want those big-box Wal-Mart retailers because they generate lots of sales tax. Who cares what the residents want -- they're a bunch of freeloaders anyway, since outsiders are paying for the municipal government.
Cities will promote tourism -- festivals, carnivals, competitions -- because those bring in sales-tax revenues, even if the residents might enjoy some peace and quiet.
Cities will cater to sales-tax generators, rather than the needs of residents. For example, downtown Salida has some traditional affordable housing -- second-floor apartments above retail shops.
Of course people shopping downtown need convenient parking. But people living downtown also need parking, but when the city acts on parking, it acts only to benefit shoppers -- stiff fines for parking for more than two hours, but no effort to find a place for downtown residents to park.
That's sound business -- the downtown residents will probably contribute to the local sales-tax coffers anyway, whereas shoppers, if they can't easily park while searching for crystals to purchase for harmonic transcendence, might go elsewhere and contribute to some other town's sales-tax revenue at the expense of Salida's.
But sound business isn't always good government, especially when residents elect that government to represent their interests. Relying on sales tax paid by outsiders means the local government faces pressure to serve sales-tax generators, not local residents.
And it will probably get worse. According to the Colorado Municipal League, in 1983 our towns got 38.6 percent of their revenue from sales tax and 12.1 percent from property tax. In 1993, it was 43.8 percent sales tax and 11.3 percent property tax.
In other words, the typical Colorado resident wants
tourists to pay for local government. Fair enough, but in
that case, we shouldn't complain when local governments
turn into subsidiaries of the tourist industry. As the
saying goes, he who pays the piper calls the
tune.
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