Bold tax plan; really bad timing

Filed under: Opinion |

We were pleased that Vice Mayor Larry Small took the time to work up a spread sheet showing what a radically revised local tax system might look like. Few politicians are bold enough, or foolhardy enough, to attach their names to a proposal whose centerpiece is a nearly 600 percent increase in the city property tax.

Clearly, Small realizes that the plan, as presented, would never pass muster with the electorate. It’s a radical, sweeping proposal which would both raise taxes and infuriate many special interest groups.  But, as Small intended, it might ignite a healthy discussion about our tax system.

This year, the aggregate budget shortfalls of the 50 states could exceed $120 billion.  California, with a projected deficit of $22.8 billion, leads the nation in fecklessness, but the Golden State has plenty of company.

Nationwide, virtually every state, every county, every municipality and every school district has had to trim budgets, reduce work forces and eliminate programs.  Their woes did not result from poorly designed tax structures, but from the severe nationwide recession that has affected all of us.

That said, the City of Colorado Springs has a particularly rickety, ad hoc and unsustainable tax menu.

Until the late 1960s, the city did not levy a sales tax, relying almost entirely upon property taxes.  We’ve since so changed the tax portfolio that less than 10 percent of the city’s general fund revenue comes from property taxes.

Over-reliance on the sales tax poses obvious problems.  Over-reliance on property taxes also would pose problems.  But even with a “perfect” tax system, one which maintains dynamic equilibrium between revenue sources and one unaffected by the combined ravages of TABOR, the Gallagher Amendment and Amendment 23, the basic problem remains the same.

Like health care, the cost of local government increases every year.  We insist, rationally enough, that local governments deliver the services that a modern metropolitan area requires.  Public safety is paramount, but we want a good transportation network, well-maintained parks, a superior public school system, prompt snow removal, appropriate storm drainage, extensive street lighting, fast emergency response … and that’s just the beginning.

To meet these demands, which tend to increase rather than diminish during lean times, governments have to be adequately funded.

A growing, vibrant local economy will, as University of Colorado at Colorado Springs senior economist Fred Crowley points out, deliver needed revenue to local governments regardless of the tax system.  A stagnant economy will not.

For many of us, this is the summer of our discontent.  We might anticipate a more prosperous future, but we have to live in the straitened present.

Within the next few weeks, the city-sponsored Sustainable Funding Committee will be presenting its report.  Given its diverse makeup, we doubt whether the group will make any firm recommendations, but will rather give city leaders a menu of options from which to choose.

Those options might well include tax increases of various kinds, which council might ask voters to approve during the November election.

Despite the city’s travails, we hope that council will not do so.

Voters are unlikely to approve tax increases of any kind during a recession.  That’s a simple fact of political life, especially in a deeply conservative city such as ours. And as many jurisdictions have found to their sorrow, higher local taxes might depress economic growth.

Rather than looking for salvation through a “risky tax scheme” (to quote Al Gore), council should devote its energies to promoting and enhancing the kind of strong, sustainable growth that will drive jobs and tax revenue alike.