In this election year, we have already heard, and we will continue to hear, lots about taxes.  God save us from all the cheap slogans we’ll get from the Republicans, particularly as regards “tax and spend Democrats.”  But when we vote in the “Big One” coming up this November, there will be several local tax issues to consider that illustrate some deeper problems with our tax structure.

Three county-wide sales tax proposals coming up for a vote in St. Louis County provide an excellent example:

• ½ cent increase in transit sales tax;.

• A new ¼ cent sales tax to fund psychological services for children;

• A 1.85-cent tax on out-of-state purchases after the first $2000 which would remain exempt. This tax would be used to buy equipment to enable communication for police, fire and emergency medical personal, park improvements, job programs and local government services.

The St. Louis Post-Dispatch describes these proposals in greater detail here

What’s with the  noise you ask?  These taxes will be put to good use and since Missouri has very low tax rates, comparatively speaking, they should not be overly burdensome. (According to the conservative Tax Foundation,  tax rates in Missouri are the 32 highest out of the 50 states.)

The problem, in a word, is that these proposals are all sales taxes.  And sales taxes are regressive; they tax those at the bottom of the economic pyramid at the same or at a greater rate than those at the top.  Also problematic is the fact that they are levied based on consumption rather than income.

Hotflash has written persuasively about the inequities built into the Missouri tax structure which, along with other structural problems, relies heavily on sales taxes.  She notes:

… we just keep piling those sales and property taxes on those of us who can least afford them. You wouldn’t require your five year old to carry all your packages while you walk around the mall. He won’t be able to do it. And if you’re shopping for his back to school clothes, he may only get two outfits for the year.

Not only do these regressive taxes pose more of a burden for those making less, they privilege corporations and individuals whose wealth may actually be dependent on the infrastructure that all our tax dollars provide.

But, it turns out, there is another serious, systematic problem with sales taxes.  Since the revenue they produce is dependent on how much people spend, they do not necessarily result in a predictable revenue flow.  The Post-Dispatch reported last Saturday (Sept. 6) that monthly sales tax collections were 22 percent behind August 2007, resulting in a corresponding dip in state revenue.  

The State will be able to meet its budget obligations only because of a surplus from 2007. So this year things balance out, but since consumers spend less when the economy is rocky, a situation that many economists predict will continue into next year at least, it is likely that the diminished revenue stream may persist, and there will be no surplus to tide the government over the rough patch next year.

The same issue of the Post-Dispatch offered another example of the same phenomena:  

U.S. Transportation Secretary Mary Peters said Friday that the federal highway trust fund will run out of money this month, affecting highway and bridge projects nationwide.

[snip]

At a news conference in Washington, Peters said the trust fund will have a deficit of $8.3 billion by the end of this month. The trust fund depends on the federal gasoline tax for revenue. Americans are now driving less and buying less gas, which means they’re paying less gasoline tax.

According to the the Head of the Missouri Department of Transportation, Missouri stands to lose funds for over $251 million in highway work, which may impact the new Mississippi River bridge as well as other projects.  As an aside, this bridge could have been under construction by now except that Missouri Republicans stalled it by attempting to pay for Missouri’s share of the costs–Illinois will pay half–by insisting that it be a toll bridge.  Of course they were just trying another way to jigger the system by which we provide our infrastructure to make it more regressive.

So when you try to decide what to do about proposals to increase sales taxes, it might be a good idea to think about the tax system you would be endorsing if you vote for them.  It also suggests that we need to work harder to get progressives into the legislature who understand the need to reform the tax structure so that everybody pays their fair share and we get the services and infrastructure we need.  Democrats do not stand for “tax and spend,” but for fair taxes.  And we have to start saying this loud and clear.