Cure the Sales Tax Addicts
Give most cities or counties in California the choice of having a housing development, a business park, an auto mall or a Wal-Mart and they’ll pick the auto mall or the Wal-Mart every time. Never mind that the latter two eat up a lot of land, are ugly and cause traffic congestion. Forget that the business park would bring in higher-salaried workers. Or that a nice new residential neighborhood would add stability to the community.
It’s all about the sales tax. Cities and counties get back one cent in sales tax revenue for every dollar spent within their borders. They love auto malls and “big box” stores because they generate a lot of revenue.
Proposition 13, passed 23 years ago, slashed the property tax that local government had depended on to pay for police and fire protection, sidewalks, street lights and other municipal services. Nowadays, housing tracts are a drag for local government.
Most of the property tax goes to the state, and the locality is still stuck with financing the usual residential services. It’s the same for business parks, because the employees’ state income tax goes to Sacramento. Sterile auto malls and traffic-clogging big boxes are a public planner’s nightmare, but local governments love them.
Typically, growing suburban areas offer all sorts of incentives to lure high-sales-tax retailers, leaving behind abandoned malls and failing retail centers on Main Street. Neighboring jurisdictions often suffer from increased traffic generated by the new businesses but get none of the tax benefits.
“There is an endless chase for the sales tax,” says Assemblyman Darrell Steinberg (D-Sacramento). The first modest step toward a solution is before the state Legislature now in the form of AB 680 by Steinberg, a former Sacramento City Council member.
Steinberg’s bill provides that beginning in 2003, cities, towns and counties in a six-county region surrounding Sacramento allocate local sales tax revenues in new ways. The change would apply only to growth in the 1% local sales tax. The first third would be distributed as now, on the basis of sales within the city or county. Another third would be distributed by population in the six counties and their cities. The final third would reward towns and counties that meet certain goals for construction of affordable housing, caring for the homeless and sensible land-use planning.
Opponents, including the League of California Cities, are certain to attack the bill. But here are the choices: The cities and counties can begin working with the Legislature to fix the state-local fiscal mess. Or fed-up environmental and good-government groups will sponsor a ballot initiative to fix it without giving local officials a voice.
