EDITORIAL: Town Council Weighs In on County’s Proposed Tax Increase, Part Three
Sales and excise taxes are the most regressive, with poor families paying almost eight times more of their income in these taxes than wealthy families, and middle income families paying five times more…
— ‘Who Pays: A Distributional Analysis of the Tax Systems in All Fifty States,’ published by the Institute on Taxation and Economic Policy, 2015
Taxation is definitely one of the more perplexing and frustrating inventions of civilization, and a point of contention even back in Biblical days, when Jesus of Nazareth was asked, publicly, whether he believed the Jews ought to pay taxes to the oppressive Roman government.
Whether the citizens of Pagosa Springs generally believe their Archuleta County government is oppressive, I cannot say. We might learn more about that this coming November, if the Board of County Commissioners (BOCC) decide to ask the voters to approve a substantial tax increase — for a duration of maybe 20 years or so — to fund expanded Sheriff’s facilities.
The BOCC — retired police officer Steve Wadley, hairdresser Ronnie Maez, and former non-profit director Michael Whiting — seem to be in agreement that the existing County jail should not be renovated into an upgraded jail facility, but should instead be remodeled for a completely different use… and that a new and much larger jail should be constructed in the Harman Park subdivision uptown. How much larger that jail should be is still a point of contention a week before the final decision is scheduled to be made.
And what type of tax the voters should be asked to approve has likewise not been decided. As we noted yesterday in Part Two, the Town Council last week unanimously agreed that the only type of tax increase they could endorse was a property tax increase.
So what should we make of this sign, posted outside the entrance to the uptown Walmart store?
Walmart is the world’s largest company in terms of revenue — about $480 billion in 2016 — and also the largest private employer in the world with 2.3 million employees. And Walmart is concerned about online retail sales… with good reason. According to an article posted to Business Insider last February, the National Retail Federation expects total retail sales to grow about 4% in 2017, but expects online sales to grow 8-12%, up to three times higher than the growth rate of the industry as a whole.
Another group concerned about the rise of the online retailer is the National Conference of State Legislatures (NCSL). Last year, they published an article by Jackson Brainerd that begins like this:
The sales tax has fallen on hard times. Designed to capture payment on every purchase meant for general use, state sales taxes often miss transactions that should be taxed and apply to ones that shouldn’t, experts tell us.
For years, consumers’ spending preferences have shifted to shopping online rather than in stores and to buying more services than tangible goods. Since many states don’t tax such purchases, these changes have undoubtedly contributed to the currently anemic state of sales tax revenues.
In NCSL’s “Fall 2015 State Budget Update,” 22 states reported that general sales tax revenues fell below estimates or that revenue targets had been lowered. In Wyoming, for example, total taxable sales in the third quarter of 2015 were 18.2 percent lower than a year earlier.
And it’s not looking much brighter this year. In Kansas, retail sales tax revenues were $12.2 million below estimates in February 2016, contributing to an overall $53 million shortfall that prompted cuts to higher education…
The picture doesn’t seem to be improving, if indeed online retail is growing at three times the rate of brick and mortar retail. An increasing percentage of online growth is reportedly coming from shoppers making purchases on their mobile phone — that is, from people who can shop while riding on a bus… or taking a coffee break at work…. or watching the kids play soccer.
So that’s the national picture. But Pagosa Springs — isolated, and with a population considerably ‘older’ than the average Colorado community — has its own peculiar retail dynamics.
We can’t say, exactly, why the retail landscape of downtown Pagosa Springs has undergone such a significant change over the past decade. Once upon a time, the Pagosa retail scene offered a reasonable (though limited) variety of shops. Today, the downtown commercial area is dominated by second-hand stores and gift shops.
What will Pagosa’s sales tax picture look like in, say, 20 years… if our County government were still trying to pay off the bonds for a $25 million jail project… using sales tax revenues?
Worst case scenario, in terms of lost sales taxes, would no doubt be a vacated Walmart store. Last year, Walmart closed 154 stores in the U.S. — many of which will no doubt remain vacant for years, maybe for decades. Doesn’t happen often, but it happens.
From the NCSL article mentioned above:
In 1992, the U.S. Supreme Court reaffirmed in ‘Quill v. North Dakota’ that, in order for a state to have the authority to require a business to collect and remit sales taxes, the business must have a sufficient physical presence — or “nexus” — in the state.
The ruling did not prevent states from collecting taxes on online purchases, just those made from out-of-state retailers. It also left room for Congress to address through legislation the issue of what constitutes a physical presence in the digital age — something it has declined to do. In the meantime, there has been a dramatic shift toward electronic commerce. States lost an estimated $23.3 billion in 2012 in uncollected taxes to online and catalog purchases, according to University of Tennessee economist William F. Fox.
Next week, the Archuleta BOCC may be making a decision about placing a tax increase proposal on the November ballot. If they choose to propose a sales tax increase, it appears that their fellow community leaders at Town Hall will be unable to endorse the ballot measure.
If the BOCC instead chooses to propose a property tax increase? Will voters elect to return more of their coins to Caesar?
EDITOR’S NOTE: In Part Two of this article series, I suggested that a new Town sales tax would nullify the County sales tax. Upon further research, I have been unable to verify that this is legally the case. Many Colorado towns and cities collect a municipal sales tax side by side with a County sales tax. I have therefore removed that comment from Part Two.