Last week, one of the ideas in the Connecticut legislature generating public discussion was a proposal to let Connecticut cities collect additional sales tax. It’s an idea I’m not opposed to, although I’d prefer to see all Connecticut municipalities have additional flexibility in revenue-generation.
I note that the Courant is running an editorial opposing the idea:
Raising the tax within cities would drive shoppers out of town. City residents who can’t travel far — typically the poorest of the poor — would be stuck paying the higher rate.
Retailers who want to hold on to their clientele would likely relocate just beyond the city limits, and new businesses would have little incentive to move in.
These comments merit a couple of questions in rebuttal:
First, municipal sales taxes are viewed as an alternative to raising property tax mill rates beyond their already obscene levels. Property taxes are today paid by the poor, albeit indirectly (built into rent, assuming non-homeownership).
As currently structured, sales taxes are semi-progressive; food, basic clothing, and many services are exempt from sales tax. Presumably such purchases make up a larger portion of the spent-income of the poor than of middle-class or affluent individuals.
So, if you shift the tax burden from property to sales, aren’t you also shifting some of the burden to those more able to afford it, reducing the incentive for homeowners and small businesses to flee to less-taxed towns, and generating a little income off folks who work in the city, consume some of its services, but only own property elsewhere?
On the other point—I can’t help but note that Enfield (6% CT sales tax) seems to have quite a bit of recent commercial development as compared to neighboring Agawam and Longmeadow (5% MA sales tax). Does a one-point difference in tax rate really drive significant differences in shoppers’ and commercial developers’ behavior?