On Tuesday, Feb. 24 Scottsdale City Council will debate the first real tax reform in the history of the city of Scottsdale.
A workshop has been scheduled to discuss the proposal I made last month to eliminate the sales tax imposed on retail sales of food for home consumption.
Since the beginning of the recession, the council has never entertained a discussion of reducing the tax burden on our citizens.
Their sole gesture to tax “relief” has been to forgo a 2 percent indexing increase in the “primary” property tax. Primary property taxes are about $25 million, so forgoing the 2 percent index avoided a $500,000 tax increase each year. They’ve done this now for four years, so the cumulative “relief” provided now amounts to $2 million.
But think about this: five years ago, the city’s collections from the 1.65 percent local sales tax totaled $129 million. Since then, collections have grown every year and are expected to be $163 million this year. That’s a tax increase of $34 million!
Suppose your council embarked on a mission bolder than just saving the average citizen a pittance in property tax increases. Imagine your council committed to address some of the regressive and inequitable features of our city finances. Imagine tax reform that benefits the average citizen!
In the course of the discussion on Feb. 24, we may hear arguments about whether the “food tax” is fair and whether we can afford to eliminate it. Consider the following: Is the food tax fair?
The taxes on food for home consumption amount to $11 million a year, borne substantially by Scottsdale’s 220,000 citizens. A family of four might pay as much as $200 per year in food taxes. Even more disturbing, the burden of this tax weighs most heavily on those least able to afford — low-income and fixed-income families.
Economists call this kind of tax “regressive” meaning the tax bears no relationship to the taxpayer’s ability to pay, as measured by assets or income.
In contrast, consider who’s been helped by forgoing the 2 percent property tax index increase. The biggest winners have been businesses, since they pay half of all property taxes. The next biggest winner’s circle is filled with non-resident property owners (both snow-birds and speculators) and owners of high-value homes and estates.
The average Scottsdale citizen has probably enjoyed less than 20 percent of the $2 million of tax “relief.” So what is that? $2 per person? $5 per person? Surely not much more.
Can we afford to eliminate the food tax?
We’ll probably hear a lot about how the budget is tight next year. What that means, of course, is since fiscal year 2009/10 we have allowed growth in the city budget to consume the entire $34 million of increased sales tax revenues (not to mention increases in other revenues.)
We have allowed the priorities of city government to come ahead of any priority for tax relief for our citizens.
OK, so what about the future? Over the next five years sales tax collections are predicted to grow another $24 million. Are we going to allow the budget to grow so fast it consumes all this money too? Couldn’t we commit to give half those gains to the citizens of our community?
For that matter, is it heresy to suggest we fund this initiative, in part, by reclaiming the property tax waivers we’ve granted to businesses, non-residents and our wealthiest citizens over the past four years?
What is required is a will of council to give all the citizens of Scottsdale priority to share in the benefits of this economic recovery.
I urge every citizen to write, call or send an e-mail to all council members letting them know what you think their priorities should be. Together, we can accomplish tax reform we can truly be proud of.
Editor’s note: Mr. Smith is a member of Scottsdale City Council