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Archive for Sunday, November 6, 1994

SALES TAX

November 6, 1994

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If not this sales tax, then what?

If Tuesday's referendum for a 1 percent countywide sales tax fails, city and county officials have several options, says County Administrator Craig Weinaug.

The first is to abandon projects earmarked for sales tax revenues. Those are a new county jail, new parks and recreation facilities and expanded community health facilities.

He noted, however, that officials would expect eventually to be compelled by a court order to build a new jail.

The city of Lawrence and Douglas County could ask the Kansas Legislature to impose a sales tax. Even so, a referendum would be necessary. ``We cannot under any scenario impose a sales tax without approval of the voters,'' Weinaug said.

Voters could be asked to fund the improvements through a bond issue, which would increase personal property taxes.

Douglas County voters will decide Tuesday whether they want a 1 percent countywide sales tax to fund a new jail and other capital projects. But officials say the vote will be as much a philosophical measure as a financial one.

For people on both sides of the referendum over a 1 percent countywide sales tax, the debate boils down to choosing the lesser evil.

At the heart of the debate is the question of regressivity -- whether a sales tax places an undue burden on people at the lower end of the income spectrum. Even sales tax opponents agree that a property tax -- the other revenue-generating alternative -- can be regressive, particularly as it affects the elderly and others with fixed and low incomes.

``Whether it's a high-value house or a low-value house, they don't have as much money to pay the tax,'' said Kurt Thurmaier, assistant professor of public administration at Kansas University. ``They pay a disproportionate share of their income.''

Shirley Martin-Smith, a member of the 4-for-1 Committee, which is campaigning for the sales tax, said property owners already are shouldering an increased share of the tax burden.

``We've taken such major hits over the past 10 years, starting with reappraisal,'' she said. ``As I get older, I'd like to see my property taxes be more stable.''

Cushioning the blow

Rex Johnson, former Douglas County sheriff and another member of the 4-for-1 Committee, noted that some of the sales tax revenues are targeted for property tax relief. Douglas County would cut its property tax levy by two mills and the city of Lawrence would decrease its by five.

``The sales tax will not hit anybody that hard because the mill levy will drop,'' Johnson said. ``The benefits that will be received by the city of Lawrence and Douglas County will outweigh any tax.''

But Thurmaier said the sales tax, long recognized as the most regressive of taxes, may be even more inequitable as it's designed in Kansas. By state law, local sales taxes do not exempt food and medicine but do exempt services, which by and large are purchased by people with discretionary income.

``The problem is that everybody has to buy the goods, like milk,'' Thurmaier said. ``The poor family that goes to the grocery store pays the same 10 cents in sales tax.''

For the low-income family, however, the amount of sales tax paid comprises a higher percentage of total income, he said.

A springboard for change

E. Mark Larson, secretary of the Lawrence Coalition for Peace and Justice, said that whether the countywide sales tax referendum passes or fails, his organization is asking people to lobby state lawmakers to exempt food and medicine from sales taxes.

``When you're just earning enough to get by, most of your expenditures go for necessities,'' Larson said.

Lawrence Mayor Jolene Andersen said she has tried to remain neutral on the sales tax question, preferring to let voters decide whether they want the improvements the tax would pay for -- expanded space for health agencies and new parks and recreation facilities -- and how they want to pay for them.

In the case of building a new county jail, which would be financed by the county's share of the tax, Andersen said voters will simply be signaling whether they want to pay for it with sales or property tax revenues. Like other public officials, Andersen thinks a federal court eventually will order the county to replace the overcrowded jail it currently operates.

But Andersen said she also wants to prevent the sales tax question coming up again. The city's expanding tax base only maintains the status quo for a growing population; it doesn't finance increased services and new capital projects.

``What I want to do in the future is figure out ways that growth pays for itself,'' she said, explaining that developers' impact fees were one way to do that.

Sharing the burden

Sales tax proponents argue that their option would spread the tax burden across a larger population. They cite downtown's thriving retail trade with people from outside Lawrence and the high number of renters -- particularly KU students -- who do not directly pay property taxes.

Thurmaier said the degree to which landlords truly can pass through property tax increases depends on supply and demand in the local real estate market.

He thinks that if true comparisons of the costs of a sales tax vs. the property tax were easier to make, people wouldn't favor the sales tax. But Thurmaier said sales tax costs depend on an individual's spending habits, and mixing those revenues with mill levies and property taxes is beyond the average taxpayer's understanding.

``It's too complicated and that's the reason people don't mind the sales tax,'' Thurmaier said.

``If you are poor, you're probably going to pay more in sales tax than you would in a property tax increase,'' he said. ``If you are wealthy, it's a tossup.''

Besides, Thurmaier said, the property tax is the tax that taxpayers love to hate.

``The property tax is highly visible and it's mainly visible because once a year you get a valuation of your property,'' he said. ``It's just kind of a cultural ritual. Because it's an annual event, bashing the property tax, it gets a bad rap.''

Martin-Smith says she's picked the regressivity issue apart and still comes out supporting the sales tax.

``You can argue the issue both ways, but you have to look at the need and you have to look at spreading (the cost) across the broadest base of people,'' she said.

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