What is sales tax equalization, and how does it work?

-- A.C. Johnson (ajohnson@thefuture.net), September 17, 1999

Answers

Sales tax equalization is the CLASSIC example of wealth redistribution or: "from each according to his ability, to each according to his need."

One district has a large tax base. Another district has a small tax base. They add up the taxes and split them.

-- maddjak (maddjak@hotmail.com), September 18, 1999.

Actually AC, it's not quite that simple.

Certain cities collect less sales tax per capita than the other cities. This may be because they are bedroom communities with relatively little retail activity, it may be because it never made sense economically to incorporate them at all, it may be for a variety of reasons. The Legislature decided that these cities with below average collections ought to be subsidized. Since the Legislature considered MVET money and sales tax revenues to be interchangeable (a dollar is a dollar to the legislature) it CHOSE to fund these subsidies with the MVET. This pretty much ensures that cities that are heavily dependent on sales tax equalization revenues (Like University Place, for instance) will be very apprehensive about the potential passage of I-695. It will also give ammunition to opponents of I-695 to try to convince voters (especially voters in towns like University Place) that the passage of I-695 would be devastating. The reality is that, if sales tax equalization is a reasonable policy, it could still be funded by sales tax, if the legislature and governor wish to do so. It would require that the revenue cuts from I-695 be distributed to other funding lines (ie., fund everyone at 98% rather than having MY 98% of the funding lines fully funded and YOUR 2% goes away). Now the legislature doesn't HAVE to do this, but if they are foolish enough not to do this, then I for sure want I-695 to pass to allow the voters to control increases in taxes and fees, because the legislature will have demonstrated their incompetence to manage tax monies on their own.

-- Gary Henriksen (henrik@harbornet.com), September 19, 1999.