2018 Election, Denver, Joshua Sharf, TABOR, Taxes

Denver’s sales tax measures: Too many, too much

The good news for Denver voters is that there’s only one property tax measure on this fall’s ballot.

The bad news is that there are no fewer than four city sales tax increases.  While the goals of all of these proposals are noble, the price tag to city residents and shoppers is just too high, threatening to make an already costly city among the most expensive in the country.

The four proposed measures would raise sales taxes as follows:

  • Referred Measure 2A by 0.25 percent for parks construction and maintenance
  • Initiated Ordinance 300 by 0.08 percent for post-secondary scholarships for the next 12 years
  • Initiated Ordinance 301 by 0.25 percent for mental health, opioid/substance abuse, and subsidized housing
  • Initiated Ordinance 302 by 0.08 percent to promote “healthy meals and snacks” for children under 18

If all four measures were to pass, Denver’s sales tax would increase by 0.66 percent.  If the state were to pass the sales tax increase for transit and roads on top of that, the increase would be a whopping 1.28 percent.  Currently, Denver shoppers pay a sales tax of 7.65 percent.  That number would jump to 8.93 percent.  According to a 2017 Tax Foundation study, Denver’s sales tax burden currently ranks seventy-first among cities with 200,000 people or more.  We could vault to as high as number 16, passing New York City, San Francisco, and St. Louis.

Taken independently, the picture isn’t much prettier.

Since 2004, Denver’s population has averaged a 1.8 percent annual increase, while the national Consumer Price Index, a measure of inflation, has increased at a 2.0 percent annual rate.  In that same time, the city’s sales tax revenue has increased at a 4.3 percent annual rate, or roughly half a point faster than what it would take to keep pace with population plus inflation and maintain services.  This year, that amounts to a $47 million difference, or almost exactly the $46 million that the City Council wants to spend on parks.

Instead of asking the citizens of Denver to pay more, perhaps the taxpayers should be asking whether or not the government is already doing too much.

Initiative 300 proposes to raise $14 million in the first year for post-secondary scholarships, and to run for 12 years.  The idea is to build on the successful Denver Scholarship Foundation, which receives some government money, but is primarily funded through private contributions.  The new bureaucracy wouldn’t have to contend with fundraising, and would be limited to 5 percent administrative costs.

Nevertheless, sales taxes are inherently less stable than property taxes; in down years, with less money available for scholarships, staff would have to be cut.  Even a lean operation would still need some reserve in order to buffer the bad years, making it less efficient than its proponents advertise.

Initiative 302 would generate an estimated $14 million, but its mission is sufficiently vague so as to render it all but meaningless.  To be eligible, charities wouldn’t have to actually deliver meals to kids.  They could teach about gardening, for instance.  Denver’s current Healthy Meals program runs at about $270,000, most of which comes from a federal reimbursement program administered by the state. pumping about 50 times that amount into a group of ill-defined non-profits is a recipe for fraud and abuse.

Of all the proposed changes, the one we’re most sympathetic to is Initiative 301.  The opioid problem is real, and we’ve heard plenty about mental health in the last few years as well.  Whether or not the government is the most efficient avenue or the most sympathetic care provider is up for debate, but these problems take real, tangible tolls on our community.

That said, affordable housing has become something of a catch-all cause, and its advocates tend to ignore zoning regulations and building codes that deliberately increase density and drive up costs.  In such an environment, where the middle class can barely afford to own a home, those least-able to take care of themselves will naturally have it worse.

But perhaps the most unfair aspect of these proposals is that they rely on the sales tax.  One of the few things that both left- and right-leaning tax policy think tanks agree on is that sales taxes are regressive, and this remains true even in the face of exemptions for such items as food and clothing.

In effect, these measures ask the poor and working-class city residents to disproportionately fund government programs intended to help them.  So to get a post-high school education, or a home, or a better meal, the intended recipients first have to pay some bureaucrat’s salary, and then fill out a binder full of paperwork to prove they qualify.

Parks for our increasingly crowded city, meals for kids, college education, and help for the addicted and mentally ill are all good causes.  They are also better paid for by voluntary contributions, or by cutting less important spending, rather than by making life even more expensive for the poor and middle-class.

Joshua Sharf is a fiscal policy analyst at the Independence Institute, and a Denver resident.

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