Wednesday, July 18, 2012

Council Critics of Half-Cent Sales Tax Bump Make (A) Sense or (B) No Sense

Posted By on Wed, Jul 18, 2012 at 2:09 PM

Jim Strickland
  • Jim Strickland
Memphis City Councilmen Jim Strickland and Kemp Conrad voted against the proposed half-cent increase in the local sales tax, which will now be placed on the ballot as a referendum question in November.

Kemp Conrad
  • Kemp Conrad
Conrad and Strickland say that government cuts should come first and the sales tax is regressive because it taxes rich and poor equally. Both are stand-up guys who will speak truth to power. But this time their principled stand looks more like grandstanding to me.

Raising the local sales tax from 2.25 percent to 2.75 percent would increase the total sales tax in Tennessee to 9.75 percent. On $1000 worth of purchases, that's an additional $5. That's the cost of a sandwich or a couple of lottery tickets, a state enterprise that is heavily supported by sales in convenience stores in low-income neighborhoods so that middle-class kids can get college scholarships.

Both locals and visitors pay the sales tax. If the suburbs get their municipal school districts, then there would be no tax advantage to either side because the suburbs propose to fund schools with a half-cent sales tax increase. This is the right tax at the right time.

Memphis is facing a revenue shortfall when property appraisals are adjusted next year. The last countywide reappraisal occurred before the recession and the crash in home values. The sales tax and the property tax are Tennessee's chosen methods of raising big money for government. Mayor A C Wharton and a majority of City Council members favor putting the sales tax increase on the ballot.

What were Strickland and Conrad thinking? Here's an abbreviated summary of my conversations with them:

Me: "Five bucks on $1,000 worth of purchases. What's the big deal?
Strickland: "It's regressive. We are taxing food and prescription drugs, and this would increase the tax 5 percent. The richest and poorest person pay the same percentage."
Conrad: "Tell that to the person making $20,000 a year. The sales tax is already a major driver of people going to Arkansas and Mississippi to shop. This would only exacerbate it."

Me: "If it's regressive then why not support an alternative that makes a difference like an income tax or payroll tax?"
Strickland: "It is illegal, under state law, we cannot do payroll tax toll roads or any of that."
Conrad: "You and I both know that is not realistic. But I would not support it anyway."

Me: "All we have for big money is sales tax and property tax. This would bring in $47 million."
Strickland: "If we bring in $47 million it will remove all pressure to right-size government. The progress we have been making will completely disappear."
Conrad: "We have a spending issue, not a revenue issue. Without reforming city government we will bore through this $47 million or $50 million or whatever it is in a couple of years. This stuff about offsetting it by reducing property taxes is bogus."

Me: "The lottery is regressive, and it is state sanctioned and state marketed."
Strickland: "It's voluntary."

Me: "Is it politically impossible for you to vote against any tax increase small or large?"
Conrad: "That has zero to do with my vote. I am not a career politically-oriented person. If the mayor would come down and lobby as hard for some common sense reform we could really turn the city around. I have never seen him work so hard as he did to maximize the most regressive tax."

Me: "What is your guess on the outcome?"
Strickland: "If it passes there will be 13 different opinions about how to spend the money. But I don't think the public is going to vote for it."
Conrad: "I think it is going to be rejected overwhelmingly. If this fails, it means people want a leaner and more efficient government."

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