Ballot issue stirs debate over which type of tax is best

Thursday, November 1, 2007 | 7:21 p.m. CDT; updated 12:37 p.m. CDT, Tuesday, July 22, 2008

COLUMBIA — At the beginning of last month, Dan Goldstein made an unusual choice. Instead of spending his evening at home, he attended a Columbia City Council work session, not out of obligation or need, but out of interest.

The work session took place before the council’s regular meeting, sans the TV cameras.

Boone County Presiding Commissioner Ken Pearson spoke to the council about the renewal of the half-cent road sales tax, which is on Tuesday’s ballot. The voter-approved road tax has been in place since 1994 and was renewed by voters for 10 years in 1998. It has generated $127 million thus far.

The discussion sparked Goldstein’s interest.

“There’s a strong incentive for upper-income people to look toward sales tax,” he said. “My best understanding of it is that a lower percentage of their income will go toward sales tax.”

At the work session, Pearson left the real “campaigning” to Dave Griggs, treasurer of Citizens to Renew the Road and Bridge Fund. Griggs explained that if the sales tax fails, county officials will be forced to raise the property tax levy from 4.75 cents back to 29 cents, the amount of the levy before the sales tax was approved. They might even boost it as high as 34 cents, the highest amount allowed by law without a vote of the people.

Goldstein said after the meeting that he believes the county could adequately cover its road needs with either property tax or sales tax.

According to research done in 2003 by the Institute on Taxation and Economic Policy, a nonpartisan research group, the bottom 20 percent of Missourians with incomes less than $15,000 pay an average of 7.1 percent of their income in sales and excise taxes. The top 1 percent of Missourians with incomes of more than $271,000, however, pay an average of 1.1 percent of their earnings.

Kelly Davis, Midwest director of ITEP, said sales taxes do take a larger of portion of low-income residents’ total earnings, but there is more to consider.

“It’s also true that low-income folks buy more things that are subject to sales tax,” Davis said. “Three-fourths of their income is subject to the sales tax — they have less money to save.”

Goldstein also noted that sales tax is volatile. Both city and county officials this year have lamented the fact that sales tax growth is falling short of projections and creating the need for tight budgets.

The debate about the fairness of sales tax isn’t new.

Columbia attorney Bill Samuels began his anti-tax battle almost two decades ago. He said he thinks county officials are pushing for sales tax because they meet too much resistance on property tax.

“They are looking for the soft underbelly, the tax people won’t oppose,” Samuels said.

Davis said sales tax is often more popular with voters because it comes in smaller increments. Samuels agreed.

“Property tax comes at you in one huge bite,” he said. “Sales tax just nibbles away at you, and you don’t notice it.”

Boone County Southern District Commissioner Karen Miller said she doesn’t think the majority of the people in the county would support a higher property tax.

“You’ve got to be a realist and think what is acceptable to voters,” Miller said.

Miller said she doesn’t remember the commission discussing whether sales tax is harder on low-income residents when the county initially sought the tax 15 years ago. She said the county needs to look at the “bigger picture” of which sort of tax is best for roads.

“Sales tax is a lot more dynamic and it brings in a whole lot more money,” Miller said. “You would have to raise the property tax so high to bring in the same amount of money.”

Ben Londeree of the Boone County Smart Growth Coalition said he has been against taxes in the past but will support the extension. Sales tax isn’t a “black or white” issue, he said.

Londeree said, for example, that many people believe property tax benefits low-income people who rent. But as a landlord, he said, he knows that’s untrue.

“I own apartments, and if expenses go up, I’m going to raise rents,” Londeree said. “So the person who is renting is the one paying the taxes.”

Pearson during a news conference on Thursday said 15 percent of sales tax revenue comes from non-county residents who shop here. He said he got that number from research done by Judith Stallmann, an agricultural economics professor with Community Development Extension at MU.

Stallmann said she used a standard formula to calculate that 12 percent to 15 percent of sales tax comes from out-of-county shoppers. She estimated “potential sales” based on the average per-capita income of county residents. Actual sales, however, are higher.

“The fact that our actual sales are higher than our potential sales suggests that people are coming in from out of the county to shop,” Stallmann said.

Goldstein said he doesn’t really know which tax is best, but “it’s important in the future that the county look at other funding options. ... Because sales taxes are volatile and they hide the true infrastructure costs of growth.”

Davis, of the taxation institute, said its shows neither option is “progressive.”

“Sales tax may be more regressive, but property tax can also be hard on citizens,” she said. “Property taxes aren’t based on your ability to pay.”

Ultimately, Davis said, voters deserve more options. She mentioned local income taxes, sales taxes coupled with credits for low-income families or property tax that comes with a “circuit-breaker” that eases the burden on people with lower incomes.

“On some level, the voter is going to weigh the options themselves,” Davis said. “Is adequacy or fairness more important?”

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