Stagnant tax policies and anti-tax fervor coupled with the Legislature's inattention to changing business patterns will play havoc with local government financing over the coming years.
Here's the backdrop.
Municipal finances depend heavily on sales taxes that the state collects and shares with communities where the sales occur. Growing online sales by Amazon, Wal-Mart, and other major retailers take sales away from local stores. And even though Wal-Mart and other retailers with physical presences in the state collect taxes for online sales, the state defines these as "use" taxes and does not share them with municipalities.
From FY 2011 through FY 2016, sales tax diversions to municipalities grew an average of 3.1% each year. However, from FY 2016 through FY 2017, total diversions hardly increased, up just 0.4%. At the same time, in the first quarter of 2017, Wal-Mart online sales jumped 63%. For the first five months of FY 2018, total diversions increased just 0.3%, while Amazon sales surged, growing to 43% of the e-commerce market.
Legislators' lack of interest in giving municipalities a share of use taxes was evident at the start of the new legislative session. On session's second day, the House Ways and Means Committee approved a bill that would spend use taxes collected from companies like Amazon on road and bridge repairs.
Reflect on this for a moment.
The expert from the conservative Tax Foundation brought in by legislative leaders to provide guidance on "tax reform," told legislators costs for road and bridge building and maintenance should be paid for with fuel taxes, i.e., those who use roads and bridges should pay for them. Short-sighted anti-tax fervor has so far killed all efforts to boost fuel taxes, leaving browbeaten legislators no choice but to rob other funds for much needed road and bridge repairs.
Sigh. There's more.
Surging online sales are also beginning to impact city and county property taxes as more and more retail outlets close. This is a double whammy for municipalities as they lose both sales and property taxes. Fung Global Retail & Technology tracks retail store openings and closings. In 2017, it reported 6,985 store closures nationally, up 229% from the prior year. Recent closures impacting Mississippi include Bed, Bath and Beyond, Sears, JC Penney, Payless, Winn-Dixie, Kroger, and Gander Mountain. Even Wal-Mart is closing stores as online sales increase.
Analysts expect much worse. Bloomberg linked the impact of growing online sales on brick and mortar retailers with increasing retail bankruptcies and problems with store credit cards to forecast a "retail apocalypse." Credit Suisse forecast "a wave" of retail store closings and bankruptcies in early 2018. Those are pretty bleak forecasts given that store closings in 2017 almost surpassed the all-time high from the 2008 financial crisis.
Of course, billionaire investor Warren Buffett anticipated this trend in online sales and cut his investments in brick and mortar retailers. We can't expect state government to be as savvy about the future as Buffett, but we should expect them to catch on when the writing is on the wall.
Fast changing business patterns have dire implications for traditional local government financing. Stagnant tax policies, which are totally under control of state legislators, need to be modernized and reformed with regard to local government.
Crawford (crawfolk@gmail.com) is a syndicated columnist from Meridian.
Sunday, January 7, 2018
Bill Crawford: Store closings, online sales, legislature imperil cities
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8 comments:
The online sales "problem" can be traced back to several things.
Next time you are in Walmart look at how many cash registers are open. Look at how long the lines are. Take note of all of the mistakes the person working the cash register makes. Ask anyone working in the store a question about the location of something or even the price of something.
Now compare that to ordering on line. There is no way you can compare the experiences.
The fuel tax and our roads and bridges was a loser from the start. Too many times the fuel taxes were used for other purposes. Just look at the amount of money the government received from the fuel tax. The only thing that had grow more is the waste of that tax received. Paperwork takes up more tax dollars than the actual project. Then we pile on all of the waste and nonsense.
If it wasn't for government carelessness, crooked politicians, and wasted money both the fuel tax and the sales tax would pay for what it was intended to pay for in the first place.
We are too worried about which political party is in power than we are about the condition of our roads and bridges. We continually elect people who know nothing about the reason they are in office but are very good at blaming everything bad on the other party.
We have made blame more important than our roads and bridges. We are getting what we think is the most important thing.
We have seen the enemy and he is us!
Just like in DC the powers that be in Jackson know what's going on. The tax cuts are trickling down. Which means increase taxes at the city and county level. They are really smart and very stable geniuses.
January 7, 2018 at 10:26 AM = 13,767th variant of the same comment
"We are too worried about which political party is in power ..." yada, yada, yada
12:54 - Just because something is often repeated does not make it untrue.
You may have heard this before as well; when you send your money out of state, local business will close down. Your, your children and grandchildren will not have jobs. Big corporations and states like Washington, California, New Jersey will benefit. So will the shareholders of those publicly traded companies.
Quicken loans is credited for saving downtown Detroit by bringing in 8,000 employees to the area. Great for Detroit and Quicken. But when you do business with large companies that are not in your state the state suffers. Loan officers in your area lose jobs, they don't have money to spend and whatever business it is that you are in suffers as a result.
Warren Buffet and many others know this. Keep spending money with Amazon. Washington State thanks you. (or they don't)
3:07, you make a good point about keeping money local. But what is someone supposed to do if local loan officers won't loan, but someone else will. Should I worry about sending money out of State when many business pulled out of Jackson, therefore already redistributing the revenue and not leaving enough to maintain infrastructure.
Same with the money for roads and bridges. Enjoy the widened interstates in Madison and Rankin? That was done with money, based on population, that should have finished I-55 to Byram first, and then widened I-20 through Clinton.
Republican or Demoract, most elected officials have agendas other than the greater good, sound government and fiscal responsibility. Might as well ship out revenue out-of-State. We already do so with our athletes and young bright minds.
Everything changes.
We don't go to Jack's Hardware for three nuts and bolts any more. Jack went out of business years ago. Forced out. We didn't care. Jack was dispensable. He can move in with his kids for all we care.
The malls are empty and we like to blame that on crime, yet we order everything over the internet - everything that we used to tromp off to the mall to buy.
Over the past hundred years we got real accustomed to the government tit. And we nurtured that system. It paid for our highways, street lights and water systems. And we elected smooth talkers and sent them 'up there' to be sure when the tit got squeezed, we got more'n our share. But the tit is drying up. Everything changes.
We need to get back to the time when we went into a store and plopped down fifteen fox-pelts and bartered for flour, molasses and a cured ham.
Ain't no damned politician gonna protect us from ourselves.
12:54 pm You are fantasizing if you believe that only one person holds views that differ from your own.
You are delusional to think your snide comments will alter anyone's point of view or deter them from expressing their view.
You don't vary , however. You are continuously unable to state a rationale for or defend your point of view or point. Nor can you point out the errors in the views with which you disagree.
By the way, I'm not 10:24 am
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