As a matter of principle, I don’t like sales taxes as a primary funding source for a government’s general fund.
They’re regressive, meaning the poor pay a larger percentage of their income to the tax than the wealthy, and they’re discriminatory thanks to numerous exemptions OK’d by the Legislature and the differing rates between municipalities.
But the city of Tucson’s budget crisis has me wavering.
On Nov. 2 city voters will decide whether to increase the city’s sales tax by 25 percent for five years.
The increase in the city’s sales tax from 2 percent to 2.5 percent is estimated to bring in $40 million a year at the city’s current level of economic activity. It could bring in more or less depending on the economy.
Thanks to its reliance on sales taxes to fund the majority of its general fund, the city has been in a constant state of budget crisis since 2007 when the housing market here tanked and the Great Recession began.
Sales tax revenues rise and fall with the economic tide yet few elected officials ever seem to think of the bad times when the coffers are crammed with cash, spending it as fast as it comes in. But when the bad times hit, they wring their hands, dither and dance trying their best not to feel the pain of the punch.
Which is partly what Tucson did the first year and a half of the recession. It spent down the city’s rainy day fund. It refinanced debt. It instituted hiring and wage freezes. It delayed capital projects. It increased some fees but refused to raise others, namely bus fares, and it refused to impose a rental tax. Twice.
Too few cuts and income increases and continued cratering sales tax receipts kept the city deep in the red.
The past year, the city has been more serious about solving its financial problems. There are about 500 fewer city employees now than three years ago and all the rest have taken double-digit pay cuts. Funding for social services and other outside agencies has been cut by more than half and the city’s trying to sell excess property.
But it won’t be enough. A $51 million hole in next year’s budget looms.
The only choices left are to make deeper cuts to the city budget or raise revenue.
More cuts mean laying off cops and firefighters and closing parks, community centers and pools, or drastically curtailing their hours and programs. All told, the city is considering laying off about 640 employees of whom about 60 percent are cops or firefighters. There’s no other way around it. Public safety accounts for two-thirds of the city’s general fund budget, parks nearly 10 percent.
Public safety, parks and roads are what the city calls its core services and the sales tax revenue would be restricted to funding these parts of the budget.
It’s a damnable situation; meaning city voters are damned if they do vote for the tax and damned if they don’t.
Principle dictates I recommend you vote no on Prop. 400. But it’s understandable if you do.