It’ll be interesting (to say the very least!) to see how Colorado Springs voters react to Mayor John Suthers’ $36 million question on Nov. 3.

Raising the city’s sales tax rate by 0.62 percent should bring in about that amount annually, based on projected 2015 revenue estimates in the 2015 budget document. It’ll raise the city sales tax rate from 2.5 percent to 3.12 percent for a total rate of 8.25 percent. It may be enough to make a dent in the city’s massive infrastructure deficit, but raising the sales tax has few fiscal advantages — and many drawbacks.

The 2015 city budget estimated property tax revenues of $19.8 million compared to sales tax receipts of $147.8 million. Property taxes are stable, predictable and certain, while sales taxes are just the opposite. The city’s fiscal meltdown in the recent recession was a direct result of over-reliance on sales tax — revenues plunged abruptly, parks went unwatered, streetlights were turned off and furious residents blamed their elected and appointed officials.

At present, property taxes provide only 8 percent of total general fund revenue, while sales and use taxes provide 57 percent. Other sources include $32.5 million in “Utilities Surplus Revenue,” $4.1 million in traffic violations, $814,000 in tow and storage charges and $19 million from the state highway users tax.

Raising sales taxes by 24.8 percent, as Suthers and an 8-to-1 majority of City Council propose may be politically attractive — but it’s ethically questionable and fiscally imprudent.

Sales taxes are regressive by nature, falling heavily on the poor. If you spend most or all of your income on the necessities of life, the difference between 7.63 percent and 8.25 percent is significant. Moreover, it’s harder to evade such taxes by shopping at stores in the unincorporated county — unless you live nearby or have reliable transportation.

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It also burdens businesses large and small, whose customers may decide to increase their online shopping and thereby avoid local taxes. Homebuilders and buyers alike will find the county more attractive – in theory, the construction materials cost of a house in parts of the county will enjoy a 3.25 percent advantage over an identical structure within the city.

We’ve already seen big retailers flee the city and set up shop nearby – witness the Wal-Mart/Sam’s Club relocation from South Academy to a site that’s legally in Fountain, thanks to a dubious flagpole annexation. The loss of the two stores cost the city $3 million in annual tax revenue.

Given that local residential property taxes are among the nation’s lowest, and that the city’s share of such taxes is minute (just 7.2 percent of the total property tax bill of a single-family residence located in School District 11), you’d think that our elected leaders would at least consider raising them.

But they’re afraid to even try. They know that Douglas Bruce and his co-religionists would accuse them of doubling or tripling property taxes, and they assume that the voters would buy into his flim-flam.

That’s not leadership. That’s political expediency, driven by the assumption that local voters are ignorant, bull-headed and easily misled. They may be right, but it’s hard to imagine that sticking Colorado Springs with the highest sales tax rate of any major city in Colorado will be to the city’s long-term benefit.

It might have made more sense to raise sales taxes modestly, increase lodging and automobile rental taxes, and raise property taxes as well. Such a complex package might be difficult to sell, but so what? Leaders lead…or do they?

5 COMMENTS

  1. It’s a typical republican approach!! Take more money from the poor, the slaves of the government and keep the rich richer!! For a prosperous future the property tax should at least account for 50% of the Budget of the town!! Aren’t we a town who wants to attract a lot of tourists as well?? Why should they pay for the inability of the past governments to have a balanced P&L account??

  2. The author left out the advantages of a sales tax. First, EVERYONE will pay it. Visitors come and use our roads. Why shouldn’t they help pay for the roads they enjoy while visiting? Should they get a “free ride”. Why should property owners pay for visitors using our roads? Also, a sales tax is a flat tax. The city elected a conservative mayor who has presented a conservative solution. Many conservatives want a flat tax in the form of a consumption tax (sales tax) with all other forms of taxation abolished. The notion that sales tax is “regressive” is nonsense. People who have more money buy more things and thus pay more taxes. Also, the author conveniently left out the fact that food is exempt from Colorado Springs city sales tax. The poor pay more for food as a percentage of their income, but they are exempt from sales taxes on food.
    The bigger picture is whether any new tax is appropriate. A Gazette writer noted that 50% of the state gas taxes are NOT being used for roads. Instead, the tax is being used for social programs. Why isn’t the mayor (and the county commissioners) on the phone with the governor demanding that ALL of the gas tax be spent on roads? We wouldn’t have this problem if that were the case. Let’s have a statewide ballot measure requiring that 100% of state gas taxes be used for roads. If we still need more, then raise the gas tax on the condition that ALL of the money be used for roads.

  3. Suthers is just trying to operate the system the way it is structured at this time. Our version of capitalism is designed to burden and stress the poor and middle class and have them pay for the services that the rich will use the most. Capitalism as a economic system is fine but the American version of it is tailored to take money from the poor and give it to bankers, lawyers and politicians. It also funds their sycophants in law enforcement.

  4. Or maybe, it has something to do with he cabal of development interests that own a lot of property?

    The way development occurs in Colorado Springs is the source of the problem. A large area is annexed by the City with pressure from the development community. The developer establishes a “metro district” with the help of City Council and has a TABOR election with the handful of developers who live there before the full build-out to set the mil levy for that metro district to ten times the city’s mil levy for the next 40 years for all the future residents of the development. They can utilize those dollars to reimburse themselves for the cost of building the infrastructure. The problem is that the 4.279 mils for City sales tax collected in the new development will never be enough to cover the added cost of maintaining infrastructure or the increased demands on public safety. And what resident living in that development thinks they have “low property taxes?” They might have low CITY property taxes at 4.279 mils, but their tax bill also has a 40 mil payment to the developer’s metro district. So their taxes aren’t low at all.

    Furthermore, the developer warranties the roads which are normally built to very low standards for a minimal period after which the city accepts the road and is on the hook forever for the upkeep of those roads. Nobody has discussed attacking the source of our road woes. Development fees, higher standards for road construction, longer warranty periods could all be effective, but the development community who funnels hundreds of thousands into City elections would not stand for any of that from the people they helped get elected. So the cycle continues. Taxes go up to subsidize development interests. Corporate welfare abounds in Colorado Springs.

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