With our usual talent for provocation, the Shelby County Commission raised eyebrows with its decision to put on November’s ballot a referendum to raise the county sales tax by half a percentage point to the maximum allowed by state law. Some suburban leaders protest because this complicates their plans to split off into municipal school districts. Some (but by no means all) Memphis leaders object because it would interfere with their own plans to “max out” the Memphis sales tax, knocking a planned Memphis referendum off the ballot.
The irked Memphis leaders have a point, and they ought to be heard. But before you decide among competing sales-tax hikes, there’s stuff you should know.
State law caps “local option” sales taxes at 9.75 percent. We’re now at 9.25 percent. This last 0.5 percent increase that the county, city, and munis are fighting over is the last tax hike allowable by state law. So, it’s our last chance to raise revenue, through sales taxes, to fund the government services required (but often not paid for) by Tennessee.
The countywide sales tax is the only one that guarantees 50 percent of the revenue to education. It’s the only one with the power to take half the revenue raised by the suburbs, redirect it away from the costly, wasteful, re-segregative muni school districts, and funnel it back into the unified school system. It’s the only one that can save the embryonic unified school system as it struggles to come into being amid a serious budget shortfall. And it’s the only one that prioritizes the county as a whole over the needs of individual cities within that county.
Timing: Back in February, I was against a countywide sales-tax hike. Sales taxes are regressive; they fall most harshly on the poor. At that time, state law prevented the suburbs from having their school referenda until 2014, and Memphis wasn’t considering maxing out the local sales tax. Now the suburbs have already hiked their sales taxes, and Memphis is poised to do likewise. That’s 90 percent of the county. It’s no longer a question of whether to raise sales taxes but what to do with the money.
And the county can’t just wait, give Memphis first crack at a referendum, and try its own thing later. Under state law, if Memphis gets its sales tax, any later county referendum would be just in unincorporated Shelby County, a population segment unlikely to vote to raise taxes. For the county, as a practical matter, it’s now or never.
A City/County Compromise: Under state law, a countywide sales tax imposes a compromise between county interests and city interests. The suburbs get to keep half the revenue raised but have to send half to the countywide education fund. By law, that second half can only be spent on schools, and it gets doled out proportionally to suburban and unified schools alike based on student population — i.e., fairly, based on need. Memphis would get $23 million or so each year to spend however it wants, but an equal amount would go to help Memphis kids get a better education.
Countywide, this is $30 million annually for education, with at least 80 percent of that going to shore up the new unified school system. They’ll need that money, even if they adopt the cost-cutting measures urged by the Transition Planning Commission (as we’ll urge them to do). This money could move us to universal pre-K, which gets inner-city kids ready for first grade by starting early, when intervention is most effective — a potentially transformative improvement for all of Memphis.
The Memphis Argument: True, if Memphis got to keep the whole $46 million, it could do more stuff Memphis needs to do. It’s not yet clear just what Memphis would do with the money, but no part of it would go to schools. Some city officials are pitching a combination of plugging a budget hole, funding basic services, and lowering city property taxes. I’ve got my own concerns about raising a regressive sales tax so as to lower a less regressive property tax, but I know Mayor Wharton believes lowering property taxes could help bring more businesses to Memphis, and he’s a smart guy.
Hopefully, by now it’s clear that this isn’t just some “pissing contest” between urban and suburban county commissioners but a crucial question of funding priorities. It requires dialogue, especially between Memphis officials and Memphis-based county commissioners. When the former (and the media) accuse the latter of “ignoring their constituents’ needs just to stick it to the suburbanites,” they’re not helping that dialogue.
County commissioner Steve Mulroy was a member of the majority that voted last week for the county sales-tax referendum.
