Tea Party of Scottsdale, AZ
Our mission is to attract, educate, organize, and mobilize our fellow citizens to secure public policy consistent with our three core values: Personal Freedom, Economic Freedom and a Debt-Free Future


 

 

Taxes - A City "Fair Tax"?


Bob_Littlefield.jpgby, former City Councilman, Bob Littlefield

If you stop and think about it, the number of different types of taxes we pay to various levels of government is staggering. We pay income taxes to the federal and state governments (in some states people even have to pay city income taxes). We pay sales taxes to the state, counties and cities. We pay property taxes to the counties, cities, school districts, Community College Districts, and in some locations fire districts and community facility districts. And if you own a business there is a whole extra set of taxes – unemployment, luxury taxes, liquor taxes, tobacco taxes, gasoline taxes and more.

We also pay fees to various governments for services they provide. Scottsdale residents, for instance, pay the city for water, sewer and garbage services. On the surface these fees seem less onerous than all of the various taxes we pay. After all, we are getting something tangible in return for the fees we pay. However, cities have inserted “stealth” taxes into these fees. Here’s how:

 

Most city fees are paid to what are called “enterprise funds” rather than to a city’s general fund. In theory each enterprise fund is supposed to be self-sustaining, charging enough in fees to cover the costs of providing their service. In reality these enterprise funds charge significantly more than the direct costs of providing their services. The city’s general fund then charges the enterprise fund for providing overhead services such as payroll, IT, legal and accounting. Presto, some of the money you paid for your water, sewer and garbage collection services ends up back in the general fund, just like sales and property taxes!

The good news for Scottsdale residents is, several years ago we who were on the Council at the time, significantly cut back the amount of money transferred from our enterprise funds into the general fund. We also kept their rate increases modest and more in line with the actual costs of providing their services.

The bottom line here is that bureaucrats have devised many ways to dip their hands into the taxpayer’s pocketbooks, so you really have to watch them like a hawk to keep your total tax burden from getting out of control. But even the most ardent fiscal conservative wants some government services, hopefully provided as efficiently as possible. The question is what is the fairest and most efficient and least destructive way of funding the costs of those services?

While there is no such thing as a “good” tax, some are worse than others. Property taxes are bad because they amount to a perpetual lien on everyone’s property. Income taxes, both individual and corporate, are bad because they discourage, even penalize, success. And complying with the current overly-complicated sales tax system burdens businesses with unnecessary administrative costs that are inevitably passed on to their customers.

I believe the answer is what columnist Robert Robb calls a “business gross-receipts tax:” any business that sells anything in the state pays a tax on the purchase price. No exemptions, no exclusions, no deductions, no credits.

This tax would have many advantages. It would be simple to administer, thus slashing unproductive administrative costs. Everyone would pay something (even if only a little), so all would have a stake in keeping taxes low – no more 47-percenters! And the base for a gross-receipts tax is so big that huge sums can be produced by very low rates.

Robb’s idea is much like the proposed Fair Tax, except the Fair Tax includes a “prebate” and makes exceptions for certain purchases. But once you begin making any exceptions, all of the special interests will be lining up for their exceptions, which is how we ended up with the current overly complex and almost impossible to understand tax codes in the first place!

Robb himself thinks his idea is too radical to ever be implemented, but I believe Arizona’s current fiscal crisis may be setting the stage for this kind of radical change. Making education affordable and available for all Arizona kids is mandated by our state constitution. We clearly don’t have the money to fund that mandate, much less fund the other things we need to do, even if we succeed in cutting waste, fraud and inefficiency in state and local governments. But increasing income and property taxes would be folly in the current climate of economic uncertainty. Clearly radical solutions will be required, along with the leadership to make those solutions happen.

Bob Littlefield is a former Scottsdale City Councilman.  He can be reached by email at bob@boblittlefield.com.

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published this page in Home 2015-04-03 09:57:09 -0600