Clayton Seeks Four-Leaf Clover Of Tax Increases

As first appearing in the St. Louis Business Journal:

Like a mischievous Leprechaun sporting a four-leaf clover, the city of Clayton is proposing four new tax increases on its April municipal ballot. That is right, four tax increases at one time: two sales tax increases and two bond proposals involving property tax increases. If they all pass, Clayton will “boast” the second-highest baseline city sales tax rate in Saint Louis County, along with one of the highest property tax rates. What kind of luck would that be for Clayton residents and businesses? The answer can only be very bad luck, indeed.

In order for Clayton to continue in its position as Saint Louis County’s economic downtown, it needs to maintain low commercial taxes. The April ballot proposals represent three or four steps in the wrong direction. Having the highest city sales tax rate in the county is hardly going to encourage people to shop in Clayton. High commercial property taxes will also discourage some business investment and give businesses reasons to locate elsewhere.

One of the two new sales taxes is for “economic development” efforts. Please do not let the positive name fool you. Raising taxes to fund government “economic development” is to modern communities what bloodletting was to 16th-century medicine. Whatever the sickness (and Clayton is definitely not sick), economic development taxes, like bloodletting, are best avoided. Clayton has, to its credit, been more disciplined than most other cities in its use of harmful tax subsidies such as Tax Increment Financing (TIF) and other giveaways. Hopefully that fiscal discipline will continue, so why would Clayton want to raise taxes to fund “economic development” programs that do more harm than good?

The other sales tax would be dedicated to emergency services: police, fire, and ambulances. General taxes already fund that city priority at a very effective level, with no plan to lower those general taxes if a new, special sales tax is added. Nobody disputes the importance of emergency services, but this tax increase is more about bookkeeping and higher city revenues than improving service quality.

The first property tax proposal is probably the most defensible spending. It would finance an overhaul of the city’s residential streets, many of which are legitimately due for replacement. Good roads are a necessary function of local government, and this bond issue is a reasonable way to accomplish that. However, it is fair to point out that the commercial sector already pays a targeted, extra property tax for the downtown area, which can include street and parking improvements. Under this proposal, it would face the same tax increase for neighborhood roads as the residents of those neighborhoods.

The other property tax increase is less necessary. It would fund a bond issue for Shaw Park, especially the ice rink. Instead of raising taxes to fund improvements to the ice rink, Clayton should follow the lead of the City of Saint Louis and outsource it to private operators. Steinberg Ice Rink in Forest Park is privately managed, and the city earns rental income each year without having to operate the rink. Taxpayers and customers all benefit from a well-maintained, privately run ice rink such as Steinberg, and Clayton should revisit that option instead of asking for a tax increase.

This four-leaf clover of tax increases goes in the wrong direction for Clayton residents and businesses, and would be very unlucky for them indeed.

David Stokes is the director of local government policy at the Show-Me Institute, which promotes market solutions for Missouri public policy.