Sales taxes are no way to fund a government. They create all kinds of weird incentives that make City Hall do all kinds of weird things, and—as the current crisis shows—they leave local government helpless just when we need it the most.
Local governments like sales taxes because they’re easy to charge on non-voters. That was the basic rationale for the Destiny USA deal: we got Bob Congel to build something big by agreeing not to charge taxes on him—an influential donor—but the City and County would be fine so long as Pennsylvanians and Canadians paid enough sales taxes at the mall to make up for that lost property tax revenue.
Or remember the 2014 plan to build a new stadium for SU at Washington and University on the land that Cor got when they demolished Kennedy Square? Even though SU doesn’t pay property taxes, that stadium was supposed to generate government revenue by bringing more out of towners into the County and getting sales taxes off their ticket purchases. “Sports tourism” they called it. When that project fell through, the County came up with the Onondaga Lake Amphitheater and justified it with similar logic.
All these schemes attempt to fund local government with tax dollars collected from people who can’t vote here. This requires local government to cater to people from somewhere else, to create ‘experiences’ or whatever that get them to lose a little money while they pass on through.
And that’s a hard pill for a town like Syracuse to swallow. This isn’t a resort town that’s grown up around the idea of showing people a good time while they’re on vacation. Syracuse is, and has always been, a city for workers—a city for the people who live here. It can still be that and make money off of tourism, but that’s a difficult balance to strike, especially when City Hall has a direct fiscal interest in tipping the scales towards turning the City into a better place to visit, but less of an incentive in making Syracuse a better place to live.
Then there are the more prosaically weird incentives. How about this: the sale, maintenance, and repair of personal cars accounts for 14% of sales tax revenue in New York State. When sales tax is your main source of revenue, and when 1 in 7 sales tax dollars comes from people spending money on cars, then local government does have a real incentive to encourage more driving and less walking, bike pedaling, and bus riding.
Local government has that incentive, that is, if it doesn’t care about making life better for the people who elect it. Car dealerships are a nuisance, cars can bankrupt families, and ubiquitous car-ownership means too many tax-sapping city-killing parking lots—a bunch of little facts that all point to the bigger fact that City Hall should be doing everything it can to make life easier for people who don’t own cars. But when your next year’s budget relies on sales taxes generated by car dealers, gas stations, and auto shops, it’s too easy for City Hall to lose sight of that greater good.
And finally, this economic crisis—like every other one that came before it—shows just how insane it is to fund a government with sales taxes since the government is most needed at the very times when people stop buying stuff. Onondaga County is spending huge amounts of money on Coronavirus testing. Centro is transporting essential healthcare workers to the hospitals while also voluntarily forgoing all fare revenue in order to protect its bus operators from infection, and it needed a federal bailout to keep going. Syracuse needs libraries and community centers to help people apply for unemployment, find new jobs, and fill out the census now more than ever, but instead OCPL is laying off staff. This is what comes of using a tax on consumer spending to fund the very services that become most necessary when people don’t have any money to spend.
. . .
I don’t know what the better option is. Income tax, payroll tax, land tax, making non-profits pay property tax? There are probably good practical and theoretical reasons to oppose all of them too. But here’s what I do know: sales taxes are bad. They make Onondaga County and Syracuse City Hall do weird things, they get in the way of making the City a better place to live, they all dried up right now exactly when people need local government the most. Can we please try something else.