Sunday, May 9, 2010

Will Placerville Increase Sales Tax to Subsidize Water?

It is hard to think of two common government policies in the Valley that I dislike more than subsidized water and funding local governments with sales tax.

Subsidized water encourages inefficient use of a scarce natural resource, and local government sales tax dependence is part of the reason our local govts seem to hate people - they demand costly services - and love shopping centers with big parking lots - revenue from people who use costly services in other communities! (I say leave the sales tax to the state, and give local govts more access to property and income taxes.)

So I found this story about sales tax in the Sac Bee very disapointing. The article is not about water, it is about how Placerville's strategic location is ideal for extracting sales tax from visitors. They achieve high sales tax revenue without the auto malls, big box stores, and sprawling malls favored by most other cities. Then, it goes on to describe a proposal for Placerville to combine two of my least favorite policies in a single package. Of course, it's popular and it makes complete sense for them to pursue this strategy given the incentives they face.
The state median (per capita sales tax for local govt) was $129 in 2008, the last year for which comparisons were available. Placerville's revenue was $313 per capita that year...Despite its high tax ranking, Placerville is considering a quarter-percent hike in its sales tax rate to 8.75 percent...

The idea is not to reverse the dollar losses, but to cope with recent hikes in water and wastewater treatment fees. By raising sales tax – much of which is paid by visitors – water and wastewater fees could be cut by 10 percent and 33 percent, respectively, Warren said.

"It's becoming a very popular alternative," Warren said. (Dave Warren is Placerville's finance Director)

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