The Bellingham Herald: Pro and con- Pierce Transit tax
media mentionPublished: October 15, 2012
By Jonah Jensen, John McCluskey & Erik Bjornson — Contributing writers
NO: Measure would burden the poor and harm Tacoma’s economy
Tacomans have been extremely generous in the last few years, paying an ever-increasing sales tax rate for new or increased government services. For the first time in Tacoma history, Tacoma’s sales tax rate has recently matched the stratospheric tax rate of Seattle itself of 9.5 percent.
Yet in November, with Proposition 1, Pierce Transit will ask Tacomans to pay a record combined sales tax rate of 9.8 percent, an increase of 0.3 percent. If Proposition 1 passes, Tacomans would be forced to pay the highest sales tax rate of any of the 200-plus cities in Washington state for the first time in Tacoma’s history.
Rather than proposing an increase with a sunset provision, Pierce Transit is seeking a permanent increase, even if and when the economy improves.
Collecting revenue though high sales taxes is widely considered unjust as it places the tax burden disproportionately on lower-income individuals.
A study by the Institute on Taxation and Economic Policy – affiliated with the liberal-leaning Citizens for Tax Justice – found that the lower 20 percent of Washingtonian earners pay 17.5 percent of their income in taxes each year, while the wealthiest 1 percent pay a mere 3.3 percent.
A 2010 Stranger article concluded that Washington state has the most regressive tax system in the country. Thus, if Tacoma adopts a 9.8 sales tax rate, our city will arguably become the most regressive and unfairly taxed city in the United States.
Attempting to force Tacoma merchants to impose the highest sales tax rate in Washington could also have extremely harmful effects Tacoma’s economy, on the ability of small businesses to survive and exacerbate the City of Tacoma’s budget shortfall.
A 2009 study by DePaul University’s Chaddick Institute for Metropolitan Development found that communities near a border, where higher sales tax rates existed, suffered significant losses in retail which could be attributed partially to a shift in consumer buying because of varying sales tax rates.
Given that Tacoma is surrounded by lower-taxed regions, consumers could easily avoid paying Tacoma’s record sales tax by shifting their spending habits by just a few miles away from Tacoma, especially for higher-ticket items such as cars and appliances.
Alarmingly, Proposition 1 is being proposed before any study or analysis has been conducted to analyze the potential harm to Tacoma’s economy from spiking the sales tax rate.
Tacoma cannot simply ignore other cities; we must compete with them. Should there be any significant shift in consumer spending out of Tacoma through imposing the highest tax rate in the state, the City of Tacoma could experience an even great future budget shortfall requiring an even larger layoff of fire and police personnel than is currently anticipated.
The City of Tacoma wisely recognized that the B&O tax was driving businesses outside of the city and lowered the rate for small businesses. It would be shortsighted to make the same mistake with the sales tax rate.
Furthermore, Tacoma would shortly be known as the “most highly taxed city in Washington state” should the record sales tax rate be imposed. Thus, consumers may likely be dissuaded from shopping and doing business in Tacoma for the reputation alone, in addition to the actual real effects. Tacoma’s past failure to take into consideration how it is perceived has been devastating for the city.
Although well-intentioned, Proposition 1 unfairly targets those it purports to help and threatens Tacoma’s economy and the city’s budget itself.