Why are our taxes subsidizing extravagant corporate weapons retailers?

The Something Awful Forums > Discussion > Debate & Discussion > Why are our taxes subsidizing extravagant corporate weapons retailers?

pig slut lisa: Mar 5, 2012; irl is good

A big reason for this is the consistent failure of American cities to capture an adequate level of revenue through property taxation, resulting in an elevation of the importance of transactional taxes like sales taxes, local motor fuel taxes, etc.

Strong Towns posted:

The primary job of a city government is to support the things which build wealth and create prosperity within their community. They enable the creation of prosperity by investing in services and infrastructure, which in turn makes their city more valuable and funds the investment.

For example, when a city builds a nice park, people value living close to the park - children have a place to play with the neighborhood kids - so the area becomes more desirable to families with children.

When we invest in cleaning up a downtown street - when we install some benches and trees to make it a more pleasant place, it attracts more people downtown and sales increase, that causes vacancy rates to go down, and property values to go up.

We build schools and offer fire protection because families value living in an area where their children can get an education and their home is less likely to burn down, than in an area without those services.

Cities build roads between two neighborhoods because the properties on either side of the road are worth more when they are connected to each other, than if they were not.

In order for a city to make a return on their investments, as well as to judge if an investment was productive, cities need a way to capture the increases in the value of their areas they invest in. Typically, cities capture the value of their communities through property taxes or land value taxes.

If investing in a new road or a light rail line is not expected to increase tax revenue enough to pay for that road or light rail line, it is a clear indication that the community will not value that investment, and this would generally be a bad investment.

If installing a new fountain downtown brings in more foot traffic, sales increase, followed by rent and property values, and tax revenue increases enough to pay for the fountain, this would generally be a good investment.

That is city management 101.

However, Arkansas is one of those crazy states where cities are mainly funded through sales tax. This is a dumb system.

The problem with relying on sales tax is that everything other than retail becomes a burden. Shops generate revenue for the city, while houses, businesses, and factories that do not make any direct sales do not generate any direct tax revenue - yet consume infrastructure and services.

In an optimal sales tax based city, where the city government does everything to eliminate all burdens and only contains productive development, we will have a city that is purely retail - where everyone lives out of town and comes in to shop.

. . .

Other than form, the problem with sales tax based cities is that building more retail does not automatically mean more tax revenue. There are only so many toothbrushes, televisions, and cars a person will want to buy in a year. A new store opening up will not always mean we will buy more toothbrushes, televisions, or cars.

If a city invests downtown and that attracts more shoppers downtown, tax revenue won't necessarily increase as people are not necessarily spending more - they are just spending their money downtown instead of in the suburbs.

Building a new restaurant does not mean I will eat out more, only that I will have more choices of where to eat when I decide to eat out.

There is also the threat of online retail where people can bypass paying sales tax completely. Wealthier residents that travel frequently may do most of their spending out of state, or even in a foreign country. The city has access to none of this.

However, the largest problem with sales tax based cities is that they have no way of capturing or measuring the performance of their investments. Building a neighborhood park or cleaning up a residential street will not lead to people spending more. We end up with a delusion that cities are like charities - to provide services and infrastructure for the people no matter the cost, because there's no way to capture or measure it.

Basing cities around sales tax is a dumb system that we need to change.

Of course, one reason that cities are so desperate for sales tax revenue is that they often intentionally prevent any style of development that generates a higher value/acre and lower service cost/acre than single family dwellings. Look at any city's zoning map and you'll notice a sea of (usually) yellow, which designates low-density residential. Low density residential and commercial development consistently fail to pay their own way, yet cities typically prevent anything else from being built in the vast majority of their territory.

Add to this the fact that we build our streets waaaay too wide (higher capital and maintenance costs) and you have a situation where property taxes are simply never going to cover the municipal budget. And so councils chase sales taxes.

# ¿ Jul 15, 2014 13:43

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# ¿ May 18, 2024 03:30

pig slut lisa: Mar 5, 2012; irl is good

I'm an urban planner for a midwestern college town, and we've "incentivized" a fair number of projects in the past several years. At least we have the sense to never offer money up front. Instead we do performance-based tax rebates (e.g. they can withhold a certain amount of taxes for every full-time job, or they don't have to pay sales taxes for a certain number of years, etc.). Of course, this is just a slightly less smelly version of the same poo poo sandwich.

# ¿ Jul 16, 2014 04:13

pig slut lisa: Mar 5, 2012; irl is good

VideoTapir posted:

I'd like to know how many city council members got building contracts or management jobs with these companies.

I'd guess it's far fewer than you seem to think. When I discuss this with other people in my field, we all tend to agree that these council votes generally arise out of a poor understanding of economic development rather than corruption or kickbacks.

# ¿ Jul 21, 2014 04:06

pig slut lisa: Mar 5, 2012; irl is good

SedanChair posted:

As taxpayer-funded boondoggles go, at least Cabela's is a destination. There are usually only a few per state, and people will drive for a hundred miles to get to one. Then boom, you've got motel stays, park and permit fees, shopping center business etc. It makes sense even though it's just another example of funneling public money to private pockets.

I would love to see anything more than anecdotal evidence demonstrating the positive local economic impact of subsidized Cabela's :allears:

# ¿ Jul 22, 2014 03:12

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