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Tuesday, May 3, 2016

Ross Rambles: A partially good idea

Wednesday, June 8, 2005

Terry Graybill, county supervisor, refers to a plan in Louisiana that would return a portion of sales taxes back to the county that it was collected from for the sake of economic development. He likes the idea.

There can be a good argument made for setting aside part of sales tax for economic development, with an emphasis on developing recreational areas.

A recent Des Moines Register editorial noted that the state of Iowa ranks 49th in the amount of publicly owned land dedicated to public use as a percentage of the state's total area. Only Kansas ranks lower.

These Iowa public use areas are concentrated in central and eastern Iowa and have a high level of use.

This ranking might have some bearing on why Iowa ranks 50th in population growth during the 20th century. Iowa is the only state that failed to grow in population by at least 50 percent during the period between 1900 and 2000.

However, there are two problems with the idea of dedicating sales tax to economic development in Iowa at the local level. Number one is that this plan already exists as an option for counties and municipalities. Number two is that returning sales tax to where it was collected causes a lopsided distribution of revenues in favor of the metropolitan centers in the state.

There is a local option sales tax, in effect in most counties, that is divided among the towns and county government in those counties. The use of the revenue is up to each local entity. It can be used for economic development, infrastructure improvement, property tax relief or whatever is presented to the voters when they approve the tax.

Graybill mentioned at a meeting recently that he doesn't think that 3/4 of the county government portion of the tax in Cherokee County should have been designated for property tax relief. He would like to see that money used for lake development.

The 3/4 designated for property tax relief and the 1/4 designated for county betterment was what the voters approved in 1998 for a 10 year period. It cannot be legally changed until a different measure is approved by the voters.

Cutting out a portion of the present mandatory 5 percent state sales tax and returning it to where it came from specifically for economic development is not likely when the state is claiming poverty and should not be a popular idea in the rural counties.

It was known at the time of the development of the option tax for county and municipal governments that distribution would be lopsided. It wasn't known by how much since the per capita amount was obscured by how the funds were distributed within the county. The distribution was not based strictly on population but on a combination of population and total tax valuation within the borders of the municipality or in the unincorporated area of the county.

When the School Infrastructure Local Option (SILO) sales tax was approved, the lopsided nature of the distribution was brought into sharp relief. That revenue is distributed to school districts based on a per student basis, with a school district getting a specific amount for each student who lives in the county where the tax is collected.

This also brought into sharp relief how our shopping patterns drain money from rural areas into the counties that are retail centers. Major retail center counties often generate three or more times the per capita sales tax revenue as rural counties. Taking the extremes, Louisa County, would generate a tenth of the per capita revenue from a one cent sales tax, if it had one which it doesn't, than Polk County does.

Much if not most of the sales tax revenue in a major retail center is collected from people who do not live in that county.

If the state gives sales tax to local entities, it should do so on a per-capita basis rather than returning the money from where it came.