THOSE SALES TAX DEALS

Manteca Bulletin - - Front Page - DEN­NIS WY­ATT Edi­tor

Why Man­teca chases all of those pen­nies

The sales tax deal the City of Man­teca cut with Liv­ing Spa­ces Fur­ni­ture rubbed more than a few peo­ple the wrong way. It’s the third such deal. Oth­ers brought Costco and Bass Pro to Man­teca while a ho­tel room tax split deal is bring­ing Great Wolf Re­sort.

Some call it cor­po­rate wel­fare. Oth­ers say the city is pick­ing win­ners and losers.

The bottom line is the city is try­ing to sur­vive and pro­vide ser­vices and ameni­ties in 2018 us­ing a govern­ment fund­ing model that pre­dates World War II.

There was a time when most peo­ple worked in the same city they lived in. As a re­sult their em­ployer paid prop­erty taxes that helped pro­vide mu­nic­i­pal ser­vices to their em­ploy­ees on top of prop­erty taxes the em­ploy­ees paid. Those same em­ploy­ees bought al­most all of their goods in the town where they lived. The com­pany typ­i­cally se­cured many of its sup­port ser­vices and some of the sup­plies they needed from the same mer­chants. The prop­erty taxes and sales taxes helped pro­vide ser­vices.

Now it is the norm for peo­ple to work in San Jose, do a lot of their shop­ping on the way home in Pleasan­ton or Tracy where they pay sales tax to those cities, and live in Man­teca where the city gets less than 15 cents of ev­ery dol­lar home­own­ers pay in prop­erty taxes.

Mak­ing the si­phon­ing of taxes from em­ploy­ment and shop­ping pat­tern changes more acute is the grow­ing use of In­ter­net which is es­sen­tially a sieve when it comes to col­lect­ing the use tax por­tion of sales tax.

Man­teca is not the only city by far that cuts sales tax shar­ing deals to snag ma­jor re­tail­ers who can bring in large sums of sales tax.

The Cal­i­for­nia Leg­is­la­ture needs to fix the sys­tem. To find the so­lu­tion they need not look any fur­ther than a new car deal­er­ship.

Cities at one time we mak­ing in­cred­i­ble deals with new car deal­er­ships to lure them from other ju­ris­dic­tions or to keep them in their town by us­ing pub­lic money to put in in­fras­truc­ture or make zero or no in­ter­est loans or even per­for­mance loans to build show­rooms. Per­for­mance loans ba­si­cally “loan” say $500,000 to help build a deal­er­ship. It has an in­ter­est rate at­tached to it. But if the deal­er­ship hits per­for­mance tar­gets such as a cer­tain an­nual sales vol­ume or cre­ated a cer­tain num­ber of new jobs over time the loan and in­ter­est were for­given.

A lot of cities were can­ni­bal­iz­ing car deal­er­ships in neigh­bor­ing cities given sell­ing a new car for $30,000 gen­er­ates $300 in lo­cal sales tax.

Sacra­mento put an end to the pil­fer­ing of new auto deal­er­ships by switch­ing the col­lec­tion of sales tax from the phys­i­cal point of sale to where the new car will be “garaged” after it is bought or leased.

If you have no stom­ach for sales tax deals or if you sim­ply want to ac­com­plish a higher de­grees of fair­ness in the tax sys­tem then you need to push for Sacra­mento to re­quire the col­lec­tion of sales tax based on where you are “housed.”

Rest as­sured such a pro­posal will be greeted by govern­ment types or busi­nesses with howls that it will be a night­mare to fig­ure out.

This would come from a govern­ment that uti­lizes tech­nol­ogy to col­lect tolls for cross­ing the Golden Gate Bridge by read­ing your li­cense plate, cross ref­er­enc­ing it with DMV in­for­ma­tion and sends you a bill.

This would also come from busi­nesses — many who op­er­ate out of their home — that tap into a wealth of data at their dis­posal to de­ter­mine your pref­er­ence in every­thing from books to the color you pre­fer for T-shirts and knows ex­actly what nine num­ber ZIP code to send your pur­chase.

Given Sacra­mento is a two hour drive from the Sil­i­con Val­ley it shouldn’t be too tough to find a firm ca­pa­ble of com­ing up with soft­ware al­low­ing a busi­ness to eas­ily ac­cess the sales tax rates for 482 cities and 57 coun­ties. The cost of de­vel­op­ing, dis­tribut­ing, and main­tain­ing such soft­ware should be borne by the state that can re­trieve its costs by charg­ing each busi­ness per out­let that con­ducts tax­able sales trans­ac­tions. Given there are more than 6 mil­lion busi­nesses in the state from cor­po­rate chains to one man shows and every­thing in be­tween and per­haps half are re­quired to col­lect sales tax, the state should be able to come up with a ro­bust and ef­fi­cient tax soft­ware. They could even re­quire the soft­ware to au­to­mat­i­cally di­vert pay­ment in real time at the time of a trans­ac­tion whether is by ATM, on­line sys­tems as PayPal, credit cards or cash and debt loaded cards. Driv­ers’ li­censes could be adapted with chips to key in your city of res­i­dence plus ver­ify age for spe­cific pur­chases.

Such a sys­tem would also stream­line the sys­tem for those that col­lect sales tax and dras­ti­cally re­duce or elim­i­nate non-pay­ment of sales tax col­lec­tions whether it is by fraud or through a firm’s fi­nan­cial duress.

Mean­while cities that pro­vide ser­vices for peo­ple where they live won’t be at a dis­ad­van­tage be­cause an­other city snags the eco­nomic ben­e­fits of a large em­ployer but doesn’t have to worry about pro­vid­ing ser­vices to part of the firm’s work­force that doesn’t live in the same city or can’t af­ford to live there.

At the same time a city that lures a mega-mall or other large re­tail con­cerns that draw shop­pers from other cities won’t be drain­ing the fi­nan­cial lifeblood those cities need to pro­vide ser­vices to their res­i­dents.

Un­til a sys­tem that col­lects sales tax based on where peo­ple are “housed” ex­pect cities to make deals in or­der to sur­vive.

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