Overton: Don't be cheap on sales tax

BY JON OVERTON | JULY 03, 2013 5:00 AM

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Many Iowans religiously adhere to the Gospel of Frugality. Bargain hunting and garage sales are as integral to our lifestyles as relentlessly hunting down whistleblowers is for the Obama administration. And it’s not that Iowans are typically cheap — that would mean spending as little money as possible no matter what. Frugality involves long-term planning to spend less money, even if that means spending more now to avoid greater expenses later.

Iowa City residents will likely rejoice in learning that they can keep a little more money since the local-option sales tax recently expired. In 2009, voters approved this 1 cent sales-tax increase to fund flood mitigation and recovery projects, raising $34 million.

Additionally, businesses will benefit from cuts to commercial property taxes recently approved by the state government.

But before you head out to celebrate the area’s falling taxes, keep in mind that the Iowa City government now has to scramble to make up for a loss of what will amount to more than $50 million in property-tax revenue over the next 10 years, according to Iowa City Finance Director Dennis Bockenstedt.

Even though the Statehouse promised to reimburse local governments through 2017, only the coming fiscal year is locked in. The state could still back out on its promise for following years.

Iowa City has an easy, commonsense solution to the long-term shortfall in funds. The local-option sales tax is a valuable resource that rarely takes more than pocket change from each purchase and puts it to use for the public good. Voters need to recognize that this sales tax must remain an option for future revenue streams to fund the city government.

Oddly enough, what seems like a commonsense proposal passed by a mere seven votes in Iowa City, according to election results from the Johnson County Auditor’s Office.

Who would have guessed that a 1 cent sales tax increase to fund recovery projects right after Iowa City got walloped by a 500-year flood could be so controversial? Pocket change. That’s all it cost us.

Of course, this money belongs to the people of Iowa City, and they have the right to do with it as they wish.

But with climate change, flooding will only worsen, and Iowa City will need more money to protect a growing population from a growing threat. An expanding city also demands more police, schools, roads, and other public goods. Revenue must rise at some point to meet the increasing expenses that city governments manage.

The Iowa City Area Chamber of Commerce — an advocate for business interests — actually endorsed the local-option sales tax in 2009. The tax was so miniscule that it didn’t influence consumers in choosing where to shop.

The tax demanded little from individuals, many of whom probably didn’t notice its presence, and by pooling all that small change together, the Iowa City government collected a portion of funds necessary to finance essential public works.

The City Council doesn’t need to use the local-option sales tax now, because the state is currently reimbursing property tax losses. The council may not have to propose a higher sales tax at all, but eventually, local revenue will need to rise, and the recently expired sales tax raised money effectively and painlessly.

If and when the local-option sales tax comes up for another vote, Iowa City voters would be well-served to make the frugal, long-term choice, not the cheap, short-sighted one.

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