Stan Geiger

The Sales Tax Balance of Power

Not too long ago, I wrote a piece that argued adjoining municipalities had to maintain a sort of balance of power in the area of sales taxes. If one city let its tax rate get higher than an adjoining city's, that city would be in danger of experiencing consumer flight.

I argued the above was the reason our "leaders" decided to go county-wide on the river tax---which is, so the numbers say, the reason the measure failed.

A fellow blogger linked to that piece, then proceeded to do a little counter arguing. He noted a differential in the sales tax rates of Edmond and Oklahoma City. He said buying a pair of $100 shoes would save him 63 cents if he bought the shoes in the cheaper town. And, he said, that would not prompt him to cross the city line to make the purchase.

With all due respect, that's the kind of thinking that has gotten us into trouble with respect to sales taxes.

The hair in the soup, relative to the writer's perspective, has to do with consumer spending not being limited to a single purchase on a single day. I dare say most people spend money on sales taxed items on a daily basis, in fact. Multiply 63 cents times 365 and you get nearly $230. The "it's-just-a-half-a-penny" argument loses luster when viewed in the full light of day.

I'm a single guy. When I go to the grocery store, I buy only for myself and not for, say, a family of four. Beyond the simple numbers, there are no kids involved. So I don't have to make purchase of the things kids crave, like cereals, chips, ice cream and cookies. Yet, I can scarcely make a trip a grocery store without dropping 40 or 50 bucks. It's not just the food, of course. Sundries, like razor blades, mouthwash and shampoo are necessary items as well.

Given my circumstances, it is not hard for me to imagine that a family of four could burn $100 a week in the grocery store alone.

If a family of four went to a casual-dining restaurant, it would be very easy to run up a tab of $50---even if mom and dad passed on any alcoholic beverages. Do that twice a week, and there's another weekly c-note.

Just the two things I've mentioned, buying basic necessities and dining out a couple of times a week, could cost a family of four $10,400 over the course of a year.

Then the car needs new tires. Mom and dad need clothes; kids need clothes. Then there are school supplies, Christmas, Mother's Day, Father's Day, Valentine's Day, birthdays and graduations. And every now and then, people have to spend on a big-ticket item like a new refrigerator or a new mattress set for the bedroom.

For people with the buying power to do so---even if part of that buying power comes from plastic---expenditures on things exposed to sales taxes could easily fall in the $10,000 to $20,000 range over a 12-month period.

A Tulsa citizen pays a sales tax rate of 8.517 percent. Applying that rate to the range noted above means said family of four would pay $851.70 to $1,703.40 in sales taxes in a given year.

One has to figure there are many people in this town that are paying more sales tax than they pay in state income tax. They bitch about their income taxes. They have hard numbers to view. But sales taxes are insidious; they are levied a little here and a little there. They go largely unnoticed. And I'm sure that's one reason why so many people go gleefully into polling booths to vote sales tax increases on themselves.

I think a lot of folks need to take a closer look.

Now then, let's assume a magic wand was waved and Tulsa's sales tax rate was increased to but one penny more than the rates in Jenks, Bixby and Broken Arrow.

The most heavily populated part of Tulsa is south Tulsa. And south Tulsa bumps up against the 3 cities noted. With a sales tax-exposed spending range of 10 to 20 grand per year, a south Tulsa resident would be able to save $100 to $200 in taxes annually for simply crossing the city line to shop and dine. I think most people would be willing to take a little drive to save that kind of money---fuel costs and inconvenience notwithstanding.

I'll cite some anecdotal evidence.

The state offers a low-income sales tax credit. In order to get it, a taxpayer has to fill out another pain-in-the-ass form. The credit is only $40, but I reckon few qualified taxpayers blow it off. Forty bucks is forty bucks.

If I'm not mistaken, certain Tulsa County seniors get an annual rebate on the Vision 2025 tax. It doesn't amount to much money. But I imagine all qualified seniors send in the form.

I worked at a liquor store a few years back. I remember an instance where a fellow was looking to buy a box of cheap wine. He looked at the price and told me he could get it for a dollar less in Broken Arrow. He left without making the purchase. He was willing to make a second stop to save the buck.

In another instance, along the same lines, a gent wanted to purchase a liter of Johnny Walker Red scotch. Our price was $19.99. He showed a receipt from another store at which he had purchased that product for $19.49. He wanted us to match the price. When we refused, the guy threw a fit. He took the bottle back to the shelf, and set in on the receipt from the other store in protest.

My sister's family lived in Philadelphia for a short time. They used to drive to Delaware to shop. Delaware had no sales taxes.

Given all that, I'd say most people would be more than willing to drive from south Tulsa to Jenks in order to save $200 a year (extended over 5 years of consumption that's $1,000) in sales taxes.

If Tulsa pushed its sales tax rate to a penny more than the surrounding cities, the move would be crushing to the Tulsa economy. Businesses would go out. Jobs would be lost. Houses would be emptied. And, though the objective of raising the tax would be to raise more government revenue for Tulsa, the city would likely have even less money to spend at the end of the day.

Indeed, municipalities should pay very close attention to respective sales tax rates. Heck, some idiot, like me, might even suggest that metro-area cities wishing to prosper act to cut sales tax rates in order to undercut the competition.

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