Marcia Martin: Hughes ‘right on money’
July 21, 2017
Paul Hughes’ letter regarding a citywide property tax was right on the money and motivated me to look up the Tax Policy Advisory Board Report from 2011. Even if the entire document is too daunting for casual reading, I would recommend, at the least, the Conclusions and Recommendations and the Dissenting Opinion.
The Report concluded that the city had “thrived” under the current system and had “managed successfully” the reduced revenue from the Great Recession. In fact, though the city managed its budget well, it did so by closing City Hall one day per week and deferring expenses. By design, those deferred expenses were those that would be least visible to most residents, but they affected us all.
The Dissenting Opinion makes several points about both property tax and sales tax that are still valid and worth considering in the economic climate of 2017.
Sales tax is regressive. That means that “lower household income brackets pay disproportionately higher shares of income on everything they buy, including groceries.” (p. 68)
Times have changed. When the city voted in 1978 to switch from property tax to sales tax for revenue, the main selling point was that visitors would pay for a larger portion of city services than residents. Now, local residents pay a larger portion of the sales tax revenue, 42-percent in 2011, than any other single group.
Many of our winter and summer visitors own vacation homes here on which they pay no property tax. This was not true in 1978. The Dissenting Opinion lists several ways in which second homes affect tourist-based economies in unanticipated ways. It concludes that “full-time residents … have been subsidizing the basic city services that are provided to second homes and businesses, and they have been doing so for decades.” (p. 69)
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Sales tax revenue is more volatile and less predictable than property tax.
The Dissenting Opinion concludes that, “It is time to redistribute the city tax burden in such a way as to share that burden more fairly and by using the taxable resources already at hand.” (p. 70).
Their recommendation to replace the city sales tax on groceries with a property tax that would provide a comparable amount of revenue to the city is as valid today as it was six years ago.
The opinion also addresses, and essentially dismisses, the effects of the Gallagher amendment, which would impact businesses more than residents if a property tax is enacted. Currently, businesses pay no property tax to the city and some, such as banks and real estate offices, generate no sales tax revenue to pay for the services they receive.
It is time for the City Council to seriously consider taking steps to diversify our tax structure.