[UPDATE 2:28pm: If you’d like to put together your own package of sales tax exemptions, this Dept. of Revenue pdf lists them all. The list of special-interest giveaways is mind-boggling (livestock semen? gun safes?). Of particular interest, gasoline (p.291) would yield about $28m for Metro. Taxing all personal and professional services (p.285) would net over $100m a year.]
One could be forgiven that the coming legislative struggles over plugging the State’s general fund deficit are orthogonal to the transit funding crisis. And indeed, the profound decisions to be made are likely to drown out calls to rescue struggling local transit agencies with more tax revenue.
However, of all the new revenue options being covered, one stands out as being useful for transit, and that is the option of reducing exemptions in the Sales Tax. Unlike other options, such an expansion would also increase the revenue of all other state entities that use the sales tax — including all county transit agencies and Sound Transit.
I’ve spoken to a number of veteran Olympia watchers and no one has definitively verified or challenged my layman’s interpretation. Perhaps that’ll happen in the comments.
Here are some back-of-the-envelope calculations, using the 2011 revenue estimates reported in the Schmudget blog and the estimate that Metro sales tax collections in FY 2011 will be 5.5% the size of the State take*:
- Extending the tax to candy and gum would raise $1.5m;
- bakery products, $0.9m;
- a variety of consumer services, $6.5m;
- financial services, $10.5m (mentioned in the Seattle Times) ; and
- removing the non-resident exemption, $2m.
More after the jump.
I estimated Metro’s annual budget hole in 2012-13 at about 385,000 service hours, or roughly $48m. The extensions above would plug almost half of that, and possibly more given that financial services are heavily concentrated in King County. There would also be relief for all other transit agencies and local government.
Community Transit collects about 17% as much sales tax revenue as Metro, but their budget hole is “only” $11m. All the measures listed above combined could buy back about half of the abolished Sunday and Holiday service.
Of course, it’s always possible for the legislature to specifically screw local government by writing the statute so as to not extend their authority simultaneously. Transit advocates should pressure their legislators to plug the revenue hole by reducing exemptions and making sure that those reductions apply broadly to all sales taxes.
* Showing my work: the Economic and Revenue Forecast Council estimates (pdf, pg 67) that the state will collect $7.3175 billion in sales taxes in FY 2011; the last executive’s proposed transportation budget projects 2011 Metro sales tax revenue as $406m. Thus Metro collections are 5.5% of the total State sales tax take. Community transit projects $66.8m in sales tax revenue in 2011.