October 8, 2014, 7:00 a.m.
October 9: Added, below, are
comments regarding this blog essay/column posted to the
Press-Citizen's online version of the column, and Facebook mentions of the column. They conclude with an
emailed comment from a reader, and
Nick's response to it. Below that are two comments from present and former Johnson County officials: an
excerpt from Supervisor Rod Sullivan's Sullivan's Salvos, and a
comment posted directly to this blog essay/column from former Auditor Tom Slockett.
On the Local Option Sales Tax, Think Before You Vote
Nicholas Johnson
Iowa City Press-Citizen
October 8, 2014, p. A11
My response to the dueling sales tax columns on the Oct. 6 opinion page? Think before you vote. That’s all I ask.
Income inequality is as American as apple pie. The wealthy get the largest slices. So it has always been.
The 18th Century sentiment, “Those who own the country ought to govern it,” is attributed to John Jay, our first Supreme Court Chief Justice. It didn’t just burst forth as a talking point from today’s conservative rightwing corporatists or Fox News.
We’re familiar with the results from Washington. One family owns more than do 40 percent of the American people combined. The increased value since the 2008 bank fraud has gone to the upper one percent -– including those very bankers too big to jail.
What we and the media lose with our focus on Washington is that the same forces are playing out in state capitals, county courthouses, and city councils.
It would be hilarious if it was not so inhumane.
Why does the City Council tell us we need this sales tax increase? To make up for lowered property tax receipts, they say. And what are they going to do with the additional sales tax receipts? Why, use at least 40 percent of them to lower property taxes even further.
Read that a second time before you go on. Can you imagine what Jon Stewart would do with that one?
Landlords’ apartments that the occupants don’t own will now be taxed as if they did, with lower taxes for landlords. Guess how those savings will be divided between reductions in rents and increases in landlords’ profits.
The rich become ever-richer because the tax laws are rigged. The wealthy have lower rates on profits from investing money than the working poor have on pay for investing physical effort.
Those who have to spend every dime they earn are the ones hit hardest by the sales tax. (That’s why the quickest way out of the recession in our 70-percent consumer-spending economy would have been to flow money through their hands rather than the wealthy.) [Photo credit:
Ehrenreich, Nickel and Dimed.]
Don’t be fooled by this increase of “a penny,” or “one percent.” For the math-impaired, an increase from six percent to seven percent is closer to a 17 percent increase.
Be aware we are playing Washington’s game right here in Iowa City. The Council is offering you a deliberate scheme to shift even more money from Iowa City’s working poor to its upper middle class and rich. Washington’s conservative corporatists would be proud.
[Illustration credit:
Working Poor Families Project.]
You see, this is not just tax breaks for the rich -– which it also is. It’s worse. It’s Robin Hood in reverse: further enriching our local well-off by actually taking money out of the pockets of those most in need.
Before you vote to take 17 percent more from those suffering the most, consult your head, your heart, your conscience, your God. Is that who you are? Is that who you really want to be?
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Iowa City resident Nicholas Johnson maintains the website fromdc2iowa.blogspot.com.
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Comments Regarding this Blog Essay/Column
From comments posted to the the Press-Citizen online version of the column:
Mary Murphy, Iowa City, Iowa
Thanks for writing this. I’d like to have seen everyone think more creatively about how to conserve funds before asking for more. Is every capital project truly necessary? For example, my sense is construction work to raise Dubuque St. (IC’s Gateway project) will be far more disruptive than any flooding of Dubuque and cost the taxpayers an enormous amount—Only $10.5 million of its estimated $51 million plus cost will be covered by grants and the rest will be paid for by local option taxes, general obligation bonds, and wastewater operations revenues. If this project was set aside, other compelling projects like creating a secondary access to the Peninsula and extending Foster Road to Prairie Du Chien could be done at a fraction of the cost. Extending Foster Road would also create an alternative access to the downtown to and from the Dubuque St. I-80 exit in the event of future flooding on Dubuque St. Sure Dubuque St. would need some maintenance dollars spent on it; however, not $51 million plus dollars. As another example, Johnson County could work with Iowa City staff to use more consersation bond money to develop parks and trails within Iowa City (saving Iowa City some money), especially since Iowa City voters helped pass the bond. See http://www.icgov.org/site/CMSv2/file/finance/budget/FY15/Adopted/CapitalProjectFunds.pdf for a list of Iowa City’s capital projects.
Mona SpeaksforthePoor Shaw
Nick, you nailed this to the wall. Thank you.
Thomas J. Gill, Coralville, Iowa
But it's only a Penny!, Great editorial, Thank-You
From comments posted to a Facebook notification of the column:
Phil Specht
On the other hand reducing the sales tax and replacing it with a transaction tax covering all movement of money would save the poor and tax where the "willie sutton" wealth is made.
Steve Hanken
Damned straight it would, Phil.
From Mona Shaw's Facebook share of the Facebook post:
Nicholas Johnson nailed this one to the wall. Johnson County, just don't vote for this. It's wrong. It's flat out wrong.
Lynda Waddington
What's the alternative? (Have not yet read Nic's piece.)
Tim Weitzel
The alternative is to not tacitly approve of tax cuts to the wealthy by approving additional regressive taxes that will most affect the poor. There are alternatives to the issue of affordable housing and budgeting for roads is a choice made between staff and city council.
Lynda Waddington
Due to state property tax reform, which included moving multi-family dwellings off commercial roles and to residential roles (bet no one has seen a reduction in rent), Iowa City is facing between $37 & $50 million revenue shortfall. Not saying LOST [Local Option Sales Tax] is answer, just that options for city government are limited.
Tim Weitzel
I'm aware of the limitations on revenue for local government. However, taxing the poor disproportionately greater to make up the shortfall seems highly counter intuitive. The argument has been made that most people won't even notice the difference in an extra 1% but those who are low income will notice. I guarantee it. Tough budget choices are part and parcel of running local government.
And, as a reader's email:
Just finished reading your guest opinion in today's Press-Citizen, and I both agree and disagree with what you wrote.
I agree with your description of our governmental landscape as unfair. Sometimes grossly unfair. Just off the top of my head is the reality that sales tax and Social Security tax both require significantly greater percentages from poor than from the rich. In the meantime, in between time, ain't we got fun.
I agree we have a flawed government, because it was designed and is now operated by flawed people. Someone once said we have the worst possible form of government.....except for all the others.
For instance, it wasn't infinate wisdom that our governor-for-life and tag-along legislature used to determine that buildings filled with rental apartments aren't actually commercial properties.
Where I disagree is your contention that we shouldn't use flawed governing tools, even though they're the only funding tools available. When cities -- especially those such as Iowa City and Ames with tons of apartment buildings -- are stripped of tax funding by the millions, they're forced to use the only alternative sources of funding realistically available at the present time.
Thus, my head and my heart and my conscience will vote in favor of the local option tax. About God, I believe he must have a sense of human, so he's out there somewhere laughing himself silly at what fools these mortals be.
And by the way, percentages and statictis do sometimes fall into the category of damn lies. It's correct that one penny is just one percent of a dollar. But it's also correct that one penny can represent a nearly 17 percent increase.
The whole situation is somewhat modified by the fact that all of us flawed people have at least modest control over what retail itejms we purchase, and important items such as groceries and medicdal items aren't included in the local option taxes.
As usual, I find your writing enjoyable and provocative. And what an uninteresting world this would be if we all agreed on everything."
And Nick's Reply to the reader's emailed Analysis:
You've indicated where you disagree with my contentions. Where I disagree with yours is the assertion that a 17% hike in taxes paid by the poor is "the only alternative source of funding realistically available at the present time." It's a sentiment also expressed in a letter on the Press-Citizen's opinion page this morning [October 9], James Conger's "Hold Your Nose and Vote 'Yes' on Sales Tax", p. A9. He writes, "The local option sales tax . . . is one of the only options available to . . . say[ing] goodbye to services that now serve the poor and the elderly."
Why is it that you, he, and undoubtedly many other local residents, immediately leap from "we need other sources of revenue" to "let's either raise taxes on the poor or cut their services"?
Not only do I believe there are many alternative ways to fund a City's legitimate governmental functions that I'll briefly discuss in a moment -- including expenses that can be cut as well as alternative sources of revenue -- I also believe that some of those alternatives are so unambiguously morally reprehensible (a category that, for me, includes taxes on the poor) that they should be off the table from the beginning of any discussion.
As now-Vice President Joe Biden once told me, "There are some things worth losing an election for."
Similarly, when it comes to budgets, revenue decreases, and cost cutting, whether for government, for-profit or non-profit corporations, I believe we retain moral as well as fiscal obligations to address the human consequences.
"Revenue is needed" was the justification offered by UI's athletic department for entering into contracts with the gambling and alcohol industries. As I said at the time, "Once 'revenue is needed' becomes your polestar, your moral compass begins to spin as if on the North Pole."
"Revenue is needed" was the reason a high school principal once gave me -- and a gathering of dentists concerned about what they called "Mountain Dew mouth" -- for keeping sugar-drink-dispensing vending machines in his high school. He had to do it, he said, in order to pay for the scoreboard for the football field. I said to him, "We've now established that you are willing to assign a higher priority to revenue for a football scoreboard than the health and welfare of your students. Apparently you do not feel constrained to avoid ways of raising money that will be harmful to them, including in this instance ways that are known to increase their rates of obesity, diabetes, and tooth and gum disease, among other medical conditions. That being the case, freed of such constraints, have you given thought to other even more lucrative, though harmful, revenue possibilities -- such as, say, a teenage prostitution ring?" Of course, it wasn't a serious proposal, but it made the point. Half the crowd applauded and laughed, the other half booed.
I'm really troubled by the knee-jerk, first reaction, when government expenses loom, or revenues decline (often, as in this instance, to cover tax cuts for the wealthy), "Well, I guess we'll just have to impose tax increases on the poor, or cut their programs."
That's really the beginning and end of the point I'm trying to make.
Given the sales-tax-increase advocates' conviction that there really are no other alternatives, however, let me list a few. Others might be even more undesirable, even bordering on the illegal. But we are not looking for a "good" alternative solution; we're looking for the "least worst" solution. And from my vantage point anything would be "least worst" than increasing taxes on the poor.
The first place I'd start would be for the City to limit the expenditure of the property tax revenue it does have to historically traditional, public, governmental services and functions. If it would stop providing gifts of substantial amounts of cash, "forgivable loans," tax deferrals, and redirecting dedication of tax revenues to specific for-profit developers and other private businesses, a significant portion of the problem would disappear. See, "TIFs: Links to Blog Essays" and this morning's column by Peter Fisher, "If Lucky's Getting Lucky, What About the Taxpayers?, Iowa City Press-Citizen, October 9, 2014, p. A9.
Sources tell me there are inefficiencies, and cuts in staff, programs and projects, within the City's budget that could also help cover some of the revenue decline.
Corporations and governments confronting budget cuts sometimes simply postpone previously budgeted maintenance, repair, renovation and construction projects -- if they are not essential to prevent death, disease, or injury. For example, the University's College of Pharmacy wanted to begin construction on a new building this year; the project has been postponed. Raising Dubuque Street might be an example of a project that could be postponed by the City.
Increases in fees could be focused on the upper middle class rather than the poor -- fees for building permits, trash taken to the City's dump, water and sewer, weekly trash pickup, and whatever else the City now charges for. It might even charge downtown bar owners for the cost of City employees' Sunday morning clean up of the vomit outside their businesses, and other goods and services provided downtown merchants. It might even cancel the program that enables downtown businesses to spruce up their storefronts at taxpayer expense.
Bear in mind, I'm not advocating any of these alternatives. I don't have to. I'm just making a point about the role of the ethical, moral, philosophical -- and for some, religious -- values that ought to be in play when a government decides that increasing taxes on the poor is its only alternative. This brief list of untested alternative possibilities is only provided for those who insist there are none.
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Rod Sullivan, Sullivan's Salvos
"More Sales Tax"
July 1, 2014, issue; emailed June 26, 2014
[Supervisor Rod Sullivan, a member of the Johnson County Board of Supervisors, publishes a newsletter he calls
Sullivan's Salvos. You may request a (free) subscription by emailing him at RodSullivan@mchsi.com. His views on sales tax are especially relevant both because of his official position and the experience and knowledge that position provides. This excerpt from
Sullivan's Salvos is republished here with his permission. -- N.J.]
As many of you know, I am a bit of a wonk when it comes to taxes. My interest in this area has led to some strongly held opinions against sales taxes. Here are a few reminders as to why increasing our reliance on the sales tax is NOT a good idea.
Regressivity This means that the poor pay a higher percentage of their income in taxes than do the wealthy. Sales taxes are the most regressive taxes. Income taxes are the most progressive taxes.
In 2003, a person with an income of $90,000 paid 3.2% of her income in taxes. A person earning $19,500 paid 11.1% of her income in taxes.
Relative to income, the poor pay twice what the middle class pay, and nearly 5 times the amount the wealthy pay. Even with exemptions, sales taxes hit the poor hardest.
Who are the poor? 31% (215,855) of the children in Iowa live in low-income families. 10%(70,857) of the children in Iowa live in poor families. Most of the people living in poverty in Iowa and elsewhere are children. There are more poor women than poor men. Plus we are talking poverty here, which is a much higher threshold than free and reduced price lunch.
Children are the poorest segment of our society. I will quote one of my favorite authors, Jonathon Kozol: “Charity is no substitute for economic justice.”
You cannot raise money for human services and believe they will make up for the damage done by a local option sales tax. Governmental agencies cannot improve their budget situations on the backs of the poorest of the poor. The needs of the poor will outpace any and all services that they have helped to fund.
In the Iowa City Community School District, parents and kids at Twain, Wood, and Hills pay a higher percentage of their income in sales taxes than parents and kids at Wickham, Lincoln, and Shimek. Does this make sense?
Wealthy services not taxed The services of accountants, attorneys, and stockbrokers are not subject to sales taxes. These and many other services (advertising, consulting, etc.) used primarily by the wealthy and by large corporations go untaxed. In addition, property taxes are deductible, while sales taxes are not.
Sales Taxes versus Property Taxes “Sales tax proponents frequently use the argument, “Sales taxes are better than property taxes.” First off, this is untrue. This argument is akin to saying, “Drinking is better than smoking, so we need more smoking.” Neither tax option is good for the poor.”
Sales taxes versus property taxes is a red herring The point is not which is worse, sales taxes or property taxes. The point is that BOTH hurt the poor unfairly. We need to create a more fair system of taxation, and we need to do so creatively. Sales & property taxes are not the only two options available. People who claim these are the only options are being shortsighted. We need to challenge our legislators to allow for greater local use of income taxes. This is the fairest way to finance local governments, and should be part of the mix.
What about renters? Rent includes the landlord¹s expenses plus profit. But there is no profit if there is no renter. So depending upon the market, the landlord can adjust her rent as much as she wishes, so long as the unit remains leased. Most landlords raise rents when they can, regardless of taxes. Most try to squeeze out maximum profit. This is supply and demand and will happen REGARDLESS of taxes. Supply and demand drives the rental market-nothing else. This is a fact, and economists of all stripes have backed this up. So before you E-mail me disagreeing with this fact, talk to a damned economist!
Another flaw in this argument is assuming that landlords are somehow entitled to no less profit than they are currently receiving. Owning property is an investment. People are not forced to own ¬ they can invest in CDs, gold, or the stock market. If your investments are not profitable, sell.
Programs that use relative wealth as a measure of eligibility (such as Medicaid) always include resources (property). It is not enough to have low income; you must also lack other resources, such as property. This is because the net worth of a property owner far exceeds that of a renter. Renters have less real assets. Under a sales tax, renters pay the same as their counterparts with real assets.
What about “outsiders”? Won¹t they help pay? People who live outside of Johnson County pay about 20-25% of the taxes collected. These are by and large not people from Chicago, however, but commuters who purchase goods on the way home.
I cannot, in good conscience, support a shift of the tax burden to people who have less money. What's more, I have trouble saying that a person earning$25,000 should pay more tax just because she lives in Williamsburg, Riverside, West Branch, Mount Vernon, Tipton, etc. Especially when the local wealthy would be let off the hook at her expense. It is critically important that we think of our middle and low-income neighbors who commute to this County.
In addition, there are “outsiders” who pay property tax; they are absentee landowners. Most of the buildings in downtown Iowa City are owned by people who live outside of Johnson County. Coral Ridge Mall, Proctor and Gamble, Regency Trailer Court, numerous student apartments, and thousands of other properties are owned by entities that do NOT call Johnson County home.Substituting sales tax for property tax lets these absentee landlords off the hook. Others will pay for the roads and services that add value to their properties.
Doesn¹t everyone else impose a higher sales tax? Yes. Currently, only Johnson County has no Local Option Sales Tax. When you are the only (or one of the only) counties that does something, you are either doing something very well or doing something very poorly. I believe Johnson County has been doing very well by choosing not to impose this tax.
Theological arguments I just happen to buy into a worldview that those who are able need to help those who are not. It is a basic organizing principle of any society, for one thing. Most major world religions subscribe to the idea of helping the poor.
I hold to a viewpoint (influenced by Christian doctrine) that says, “The last shall be first and the first shall be last”; “Do unto others”; “That which you do to the least among you, you do to me”; “The meek shall inherit the earth”; “Charity shall cover the multitude of sins”; “You cannot serve both God and wealth”; and “A rich man has a better chance of putting a camel through the eye of a needle than getting into Heaven.” Islam, Judaism, Buddhism, Hinduism, and most major religions share similar doctrine when it comes to caring for the poor first. If you think I am making these up, consult your own religious authority.
I prefer to follow this lead rather than doing more to comfort the comfortable.
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