Anticipating Sales Tax Revenue Drops
Local governments are increasingly relying on local sales taxes to supplement property tax revenues. While it is more popular than property tax, local sales tax is highly pro-cyclical and it generates very volatile revenue streams. When the economy is good, governments see rapid revenue growth without the hassle to raise tax rate; when the economy turns south, however, the pain of budget cut is a lot more severe.
Here are three recent cases from ICMA newsletter (11/20 & 11/24, 2008):
❑ Wilkes County, NC Anticipates Sales Tax Revenue Reduction
The Wilkes (NC) Journal Patriot (11/20, Hubbard) reports, "Cost-cutting measures for Wilkes County (NC) government were announced at the county commissioners meeting Tuesday night to help offset an anticipated reduction of at least $750,000 in sales tax revenue this fiscal year."
❑ Yuma, AZ Expects $3 Million Revenue Shortfall
In an editorial, the Yuma (AZ) Sun (11/24) writes, "Times are tough for businesses due to the slow economy, but they are also tough for government entities who depend on sales taxes and other consumer-generated revenue to help pay the bills." The Sun notes that Yuma is "anticipating a $3 million revenue shortfall."
❑ Sales Tax Revenue Drops in O’Fallon, IL
The Belleville News Democrat (11/23, Wuerz) reported O'Fallon Finance Director Dean Rich said projects "will have to go into mothballs" due to "declining sales tax revenue." City Administrator Walter Denton noted that sales tax revenue has been consistently down about 10 percent since last fall, and the city had made corresponding budget cuts so as to “weather the storm of the bad economy.”