Smith: Eliminating Scottsdale’s food tax is humane, justified and long-overdue

By David N. Smith
Posted 3/16/20

Mayor and Members of Council...

At no time in memory have citizens suffered more from disinformation and lack of information.

This is true of the national discussions of the COVID-19 virus, as …

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Smith: Eliminating Scottsdale’s food tax is humane, justified and long-overdue

Posted

Mayor and Members of Council...

At no time in memory have citizens suffered more from disinformation and lack of information.

This is true of the national discussions of the COVID-19 virus, as well as our local discussion of eliminating the food tax. I’d like to offer a response to some of what you may have heard or read.

First, the fact: The adopted FY 2019-20 budget anticipated food tax collections of $15.3 million, distributed as follows:

  • 1.10% General Fund (net of transfers to CIP): $4.1 million
  • CIP Fund (from the General Fund): 5.5
  • 0.20% Transportation Fund: 1.7
  • 0.10% ALCP Transportation Fund: 0.9
  • 0.35% Preserve Fund: 3.1
  • 1.75% Total: $15.3 million

Unfortunately, most of our local debate about eliminating the food tax has focused on the General Fund, even though the General Fund share is only one quarter of the total food tax burden on our citizens.

Here are five arguments I’ve heard many times:

“This food tax funds pays for police, fire, garbage and parks. Eliminating the food tax would strain public safety and disproportionately harm those the tax cut is supposed to help.”

The truth is…we don’t have to eliminate citizen services. As stated, only 25% of our food taxes goes to support these General Fund services. Most of the food tax revenue goes to either (a) CIP and transportation programs (which the last bond election replenished) or (b) temporary funds (that don’t need this revenue).

More importantly, you will hear tonight the General Fund enjoyed more than $10 million of revenues over expenses through the first eight months this year.

That’s on top of $50 million of surpluses accumulated in the previous four years while the General Fund was sending food tax money to CIP.

“It is never prudent to cut $16 million from a city budget without identifying a replacement revenue stream...”

This argument misses the point of a tax cut: It’s not a tax cut if you replace it with another tax.

More importantly, we have already replaced this revenue! You will hear tonight our local sales tax collections have increased 61% over the past 10 years.

That’s why we have accumulated such a large unreserved fund balance.

Moreover, you will hear our local sales tax collections over the next five years are forecast to drop only 2%, even with a prolonged recession!

“The timing makes this tax cut even less palatable.”

This insensitivity of this argument is, “don’t cut taxes when the economy dips and people need help.” This argument is in stark contrast to sympathetic actions taken by the Federal Reserve, Congress, the Administration and every other concerned government around the world.

More importantly, you will see a five-year forecast tonight that assumes (a) a recession in revenues and (b) elimination of the entire food tax and (c) no actions to reduce General Fund programs (on the contrary, the forecast assumes above market salary increases.)

Even with these severe assumptions, the current $60 million of Unreserved Fund Balance remains positive!

“Based on the demographics of our city, the majority of food tax revenue is generated by those that don’t qualify as low income, such as tourists, snowbirds, higher income residents, as well as residents from other Valley cities (Paradise Valley doesn’t even have a grocery store!)”

There is absolutely no demographic study in existence (or logical argument) to support these statements. The truth is:

  • There is no data or logical argument to suggest tourists spend any money on grocery shopping.
  • There is no data or logical argument to suggest higher income families spend more on groceries than lower income families (in fact, the opposite is more likely, since higher income families dine out more often.)
  • There is no data or logical argument to suggest residents of other Valley cities spend any appreciable amount on grocery shopping in Scottsdale. Even if the 15,000 residents of Paradise Valley spent the USDA average on food to consume at home (which is doubtful) and even if they bought all their groceries from Scottsdale stores (also doubtful), their share of our food taxes would be only 5% of our total.

“Repealing this modest tax won’t significantly improve our lives”

That’s only true for families who make so much money that $225 isn’t a significant share of their disposable income. Everyone knows, the tax burden is greatest on our neediest citizens --- those who can least afford to feed themselves or their families at restaurants.

I urge you to eliminate the food tax tonight. The action is humane, justified and long overdue.

Editor’s Note: David N. Smith is a Scottsdale resident and former City Councilmember.

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