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I authored the following commentary in the Anchorage Daily News on February 15th. To read the published story, click here.
The Anchorage Assembly is, once again, considering whether to put a sales tax proposal on the ballot in a special fall election. Anchorage voters have repeatedly rejected sales tax proposals, and they should reject this one, too. Instead of putting this sales tax proposal on the ballot, the Assembly should make their improvement proposals as regular bond propositions.
A general sales tax is bad for Anchorage. We have an efficient, simple property tax that is limited by our well-established tax cap. Adding an inefficient, complicated sales tax to the existing property tax will force our city to hire more tax collectors to collect the new sales tax and leave less money to pay for police and snowplowing. It just grows our local government without providing essential services.
Local governments are more successful collecting property taxes than any other form of tax, including sales tax. When an owner fails to pay their property taxes, the city places a lien on the property to help get the tax paid. In contrast, if a business shuts down and fails to pay their sales taxes, the city has no mechanism to collect the past-due sales taxes from the failed business. As a result, the average property tax delinquency rate is about 6% and the average sales tax delinquency rate is considerably higher.
In Anchorage, adding the proposed sales tax will mean hiring 15-20 new sales tax collectors with no change in the number of people working in the property tax division, which will continue to assess property values and collect taxes. The only way the sales tax proposal could avoid cutting essential local services like police protection and snowplowing is to raise the tax cap for the sole purpose of hiring new tax collectors. But I don’t believe Anchorage voters want to raise our tax cap just to hire more tax collectors.
The sales tax proponents argue that property owners need tax relief. But the sales tax proposal doesn’t provide tax relief — it just shifts the burden onto our everyday purchases. Anchorage residents have one of the lowest total tax burdens of the one hundred largest cities in our country, and most people I hear from prefer paying only one form of tax for local services. Anchorage residents don’t want to see prices rise when prices are already too high. Property owners won’t pay less taxes with a sales tax, we’ll just pay the new sales tax every time we buy anything from food to clothes to guns.
It’s noteworthy that while property values have risen in recent years, our property taxes have kept pace with inflation. Unlike cities where the tax rate is directly tied to property value, Anchorage’s property tax rates are directly tied to the municipal budget. Anchorage divides the budget by the total value of assessed property in the municipality to determine the mil rate. Thus, if everyone’s property value increases by 50% while inflation only rises 3%, the mil rate will drop and our property tax payments will only rise 3% to keep pace with inflation. The Anchorage property tax formula helps keep our taxes down, even with rising property values.
Better than a complicated, confusing sales tax proposal, the Assembly should give Anchorage citizens a commonsense, transparent plan for improving our community. The municipal bond proposals that we consider at every election have long addressed the diverse needs of our community. We use it to pay for essential services like roads, fire trucks and parks.
During the period I served on the Assembly and as acting mayor from 2007-2010, we often heard that Anchorage voters would never support parks and recreation bonds. And in earlier years, those bonds often failed. But for the past 12 years, Anchorage voters passed parks and recreation bonds. Our history shows that essential capital projects often take time with voters — and worthwhile projects will pass. Many people in Anchorage want to enrich our city with vibrant ideas for business development, the arts, outdoor recreation and more.
Enriching our community is a good idea and worth presenting to voters as bond packages. Just as voters took time to support our parks, if the new ideas to enrich our city have value, they will succeed on the bond ballot.
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