sales tax – Memphis Flyer

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Memphis is squeezed, or maybe screwed is a better word.

The sales tax referendum got slaughtered 69-31, the gas tax one-penny-a-gallon hike fell by a similar margin, and Memphis as a sort of 51st blue state was further marginalized in the Republican-dominated legislature. To use a popular term from Election Day, Republicans have a firewall in Nashville, and with super majorities in both chambers just think of the fun they can have with Memphis. In the state and national picture, Memphis may never matter again like it did before 2000 when it could deliver the state for Bill Clinton and Al Gore and other Democratic hopefuls. We’re a patch of blue in a sea of red and, Steve Cohen excepted, the white Democrat is a vanishing breed.

I thought the sales tax would get at least 40-percent support because it would equalize sales taxes across Shelby County. And the gas tax works out to $5 or so a year, but I guess “MATA” and “new tax” are poison, whether apart or in combo. There’s no blaming the suburbs for this one. Most of them could not vote on the sales tax referendum, and the measure was soundly defeated in Memphis precincts.

City Councilman Shea Flinn, a proponent of a Memphis sales tax bump before the Shelby County Commission preempted that gambit, says “it’s going to be a fairly big hurdle to overcome but I would not rule out bringing it up again” as a Memphis referendum in a special election in 2013. He thinks it would raise $47 million, the uses would be easier to pinpoint, and the turnout would be lower.

“If you put raising taxes on the ballot you are already way behind when you start,” he said. And unlikely to catch up, I would add after yesterday’s wipe-out.

Here’s what’s off the table: consolidation, payroll tax, city employees required to live in city limits, “taxing” nonprofits, reining in PILOTs and tax incentives, and now increasing the sales tax and gas tax. That leaves the property tax, which is likely to go up anyway next year to equalize falling valuations, and when that happens the differential between Memphis and the suburbs will drive more people away. So cut services and employees, you say? Check out a City Council meeting when cuts are on the agenda or a school board meeting when cuts or school closings are on the agenda.

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

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.”