The Prescott City Council is discussing changes in tax policy that would eliminate the city component of property tax in favor of additions to the sales tax. The discussion includes the clear memory of how city revenues plummeted when the property bubble burst a decade ago. That remains the best argument against increasing our reliance on sales tax.
For the moment, I’ll have to leave aside the point that the state legislature chose to respond to the economic crisis by reneging on its revenue-sharing agreements with municipalities, and this has contributed substantially to the revenue pinch the city is now experiencing. We’ll have get to that another time, primarily through the ballot box.
As the economy has steadily recovered, the ideological argument against property taxes has regained credence among many. The practical piece that’s so easy to miss under these conditions is that property taxes are reliable as a revenue stream and easily budgeted by homeowners and businesses. Sales taxes are quite the opposite in both respects.
As we saw in the last decade, sales tax revenues dry up just when we need them most, when economic conditions deteriorate. As unemployment rises, so does crime. Does it really make any sense to fund our police services this way? I don’t see it. Fire protection, water and sewer, trash and recycling services and streets don’t get cheaper when Walmart sales dip. I want to retain and encourage trained and competent city employees, not threaten them with layoffs because not enough people want the latest Chevy or fewer people from California want to buy in to yet another gated community.
Reliance on sales tax revenues also alters the priorities of our city officials, pushing them to promote “development” at the expense of quality of life. I believe this has been an important factor in the decisions to build the ever-failing Gateway Mall, the failed hockey arena, the failed county fairgrounds, and any number of housing subdivisions despite our precarious groundwater situation. As we found when the bubble burst, it’s a game we can’t win in the long term. Our most profitable focus is steadily and sensibly improving what we have.
Shifting sales tax rates pit communities against one another as they vie for retail traffic. Consumers here can choose among five different sales tax regimes within easy reach. This not only stresses our retailers, its puts us all at a disadvantage in negotiating with new businesses coming in, leading to ridiculous tax-relief schemes and enormous direct public spending to sweeten the deals.
Property taxes as implemented here and now aren’t perfect either, of course. It makes little sense to peg collections to relative market value, for example, creating the same kind of uncertainty as sales taxes, albeit over much more time. That’s a beef with the county, however, not the city.
My property taxes represent my investment in this community. I can buy things anywhere outside the city and pay no sales tax, and I often do, but my real property will always be in the city. I’m sure we can all agree that we want and need reliable, high-quality services from our local government. It only makes sense that we therefore have to provide it with reliable revenue.
Steven Ayres is a resident of Prescott.