Sales Tax Builds an Uncertain Future

By Jon Sharkey

With sales tax becoming an ever-more uncertain basis for municipal finance, it's time to find other job-creating alternatives.

California Controller Kathleen Connell's State Municipal Advisory Reform Team (SMART) has seized the muncipal finance issue and proposes to wrestle it, however sluggishly, to the ground. Since so few of our property tax dollars stay local, cities are forced to look elsewhere if they are to continue to sign paychecks for police officers, firemen, and road repair crews.

Translation: go after sales tax and go after it big time. Unfortunately the downside of milking this particular revenue source includes mall wars, tax give-aways, and merely minimum wage employment opportunities.

With some other fudge factors mixed in the interest of fairness, SMART would eventually scatter sales tax around on the basis of population. That sounds like it might lead to more sensible regional planning. Coupledwith last election's Prop. 11, which made inter-city tax-sharing agreements easier to do, it appeared, at last, we might be heading toward "smart" land use incentives.

However, SMART is a unparalleled example of "too little, too late."

Just as the mom and pop outfits planted along Main St. were uprooted by regional malls with easy freeway access, so mall retailers, unless they opt for a cyberstop on the information superhighway, will find their clientele no-showing in droves, bound instead for a virtual shopping spree located a mere mouseclick away.

By 2002, nearly one-third of all automobile sales will be electronic. Saturn is already advertising an online showroom in which you can select the automobile of your dreams which, after your credit checks out, is delivered directly to your door. That's right, no dealer and more signficantly, no sales tax. Cities banking on auto malls such as Oxnard and Ventura, may find they have invested big bucks in a passing fiscal fancy.

Any community that chooses to live on sales tax alone has given the nod to but another fad diet. Rather than encouraging the dash for retail cash, we should be advocating sensible land use and the creation of good-paying jobs. Getting Sacramento to provide incentives via giving back more property tax is one way to do this. There is, however, another way which directly relates to job creation and which doesn't rely on the ever elusive sales tax dollar.

Every W-2 form contains two pieces of information pertinent to this discussion, namely, the ZIP codes of 1) the employee and 2) the employer. Suppose we were to reward a city for attracting job-generating businesses by allowing a portion of the income tax collected to remain local. If the employee also resides in the same city, the percentage doubles. Think about it. The shorter our prospective employee's commute, the more cash is deposited in city coffers.

By not bowing to "big boxes" et al in pursuit of sales tax, municipalities could start wooing companies that pay enough for personnel to live where they work. The lopsided "jobs/housing balance" in Ventura County's bedroom communities promises to worsen as growth boundaries send the price of single family dwellings soaring. This income tax initiative will also pay off in less smog-choking traffic as well as more time, commitment and money expended right here.

Keep in mind that since we are talking about (ital)new jobs, this initiative wouldn't greatly impact state revenues. It would, however, give elected officials the right tool for the job--sales tax was never meant to fund the civic services which preserve your property values. More importantly, instead of watching helplessly as sales tax dollars disappear into cyberspace, we will be cashing in.