Driving away business?
Critics say the proposed sales-tax increase will reduce the amount people spend in the city
The Sacramento City Council this week agreed to move ahead with a fall ballot measure raising sales taxes a half-cent to generate about $30 million annually—it hopes enough to close the city’s persistent budget gap and begin to restore city services.
The council was expected on Tuesday—after press time—to formalize its decision from a week ago. Despite polls so far showing support for a bump, some business groups and their council allies are skeptical, saying the tax hike will drive business to neighboring locales where the tax is lower.
“There’s absolutely no doubt that it will reduce the amount of money people spend in the city,” said Councilwoman Angelique Ashby. “Let’s don’t be naive; there is going to be a business impact.”
But just how much of a business impact? “The answer is there is no measurable difference,” says City Manager John Shirey, citing information he got from consultants the city hired.
The thinking is that shoppers are more sensitive to what’s on the price tag than to the sales tax. That’s assuming they even know what the sales tax is. Shirey noted that the additional half-cent tax means an extra $1 in taxes on a $200 shopping bill at Walmart or Costco. “It’s not enough to make a difference in how people shop,” says Shirey. And not enough to make a family drive to the next town to spend their dough. At least, that’s what the consultants say.