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What Is The Economic Philosophy Behind Increasing A City Sales Tax?

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MAYOR SANDERS SADDENED BY THE LOSS OF POLICE OFFICER WILSON STILL FACES THE CHALLENGE OF GATHERING SUPPORT OF PROPOSITION D. IT WOULD INCREASE SAN DIEGO SALES TAX. SUPPORTERS AND OPPONENTS ARE VIGOROUSLY GIVING THEIR SIDES ON THE PROPOSITION. WE TURN TO AN ECONOMIST FOR BASIC INFORMATION. EARLIER THIS WEEK KPBS KATIE ORR SAT DOWN WITH UNIVERSITY OF SAN DIEGO ECONOMISTS PROFESSOR ALLEN GIN FOR HIS COMMENTS. HOW DOES IT COMPARE TO SAN DIEGO CITIES AND HOW WOULD IT FAIR IF THEY WERE TO BE PASSED. THE SALES TAX RATE IN SAN DIEGO IS THE LOWEST IN THE COUNTY OF SAN DIEGO. AND IT IS ONE OF THE LOWEST IN THE ENTIRE STATE WHEN COMPARED TO OTHER MAJOR CITIES. EVEN IF THE SALES TAX IS INCREASED A HALF A CENT. WE WOULD STILL BE RELATIVELY LOW COMPARED TO THE PURE CITIES. PEOPLE OFTEN SAY A SALES TAX IS A REGRESSIVE TAX. MEANING IT EFFECTS POOR PEOPLE THE HARDEST. DO YOU AGREE WITH THAT? IS THAT AN ACCURATE ASSESSMENT? IF A SALES TAX APPLIED TO ALL PRODUCTS IT WOULD BE REGRESSIVE TAX. AND POOR PEOPLE TEND TO SPEND MORE OF THEIR MONEY THAN PEOPLE AT HIGHER INCOMES. BUT LARGE NUMBER --A LARGE AMOUNT OF EXPENDITURES ARE EXCLUDED FROM THE SALES TAX. GROCERIES ARE EXCLUDED. MEDICAL CARE IS EXCLUDED AND HOUSING. IF YOU TAKE ALL OF THOSE EXPENDITURES OUT THE SALES TAX IS LESS AGGRESSIVE THAN IF IT IS APPLIED TO ALL PRODUCTS. NOW IN SOME RESPECTS THIS DEBATE COULD COME DOWN TO TAXES VERSES SERVICES. AND HOW MUCH PEOPLE WANT TO PAY FOR THE CITY SERVICES THAT THEY RECEIVE. SO WHAT IS YOUR TAKE ON THAT? DOES SAN DIEGO'S TAX RATE AND THE SERVICES IT OFFERS MATCH UP? KIND OF AN ODD SITUATION HERE IN SAN DIEGO IN THAT WE HAVE AMONG THE LOWEST TAXES IN THE IN THE STATE. OUR GENERAL FUND REVENUE PERCENTAGE OF INCOME IS THE LOWEST AMONG ALL CITIES IN THE STATE OF CALIFORNIA. BUT IF YOU LOOKS AT THE LEVEL OF SERVICES WE HAVE PEOPLE DESIRE A HIGH LEVEL OF SERVICES. THAT'S AN INCOMPATIBLE SITUATION. USUALLY YOU HAVE HIGH SERVICE LEVELS OR YOU WILL TAKE THE LOW TAXES AND ACCEPT LOW SERVICE LEVELS. PEOPLE TEND TO WANT BOTH SITUATIONS. THAT IS GOOD IF YOU CAN GET IT. IT'S A SITUATION THAT CAN'T BE SUSTAINED FOR VERY LONG. THAT'S WHY WE HAVE THIS STRUCTURAL DEFICIT WE HAVE IN SAN DIEGO. UNLIKE OTHER TAXES LIKE PROPERTY TAX OR INCOME TAX THAT PEOPLE SEE LEAVE THEM IN CHUNKS, SALES TAX MANY PEOPLE DON'T KNOW IT BECAUSE IT GOES AWAY A LITTLE BIT AT A TIME. HOW MUCH DO PEOPLE END UP PAYING IN SALES TAX OVER THE COURSE OF THE YEAR? IS IT COMPARABLE TO A PROPERTY TAX OR INCOME TAX? IT'S DIFFICULT TO SAY HOW MUCH PEOPLE PAY IN TERMS OF THE SALES TAX. IT DEPENDS ON THEIR SPENDING HABITS. AND YOU'RE CORRECT IN THE SENSE THAT IT IS ALMOST AS INPERCEPTIBLE WHEN YOU PAY THE SALES TAX BECAUSE IT'S JUST ADDED ON TO YOUR BILL. WHERE IT'S GOING TO HAVE AN IMPACT WILL BE ON PEOPLE WHO ARE OPERATING ON A FIXED INCOME AND PEOPLE WITH LOW INCOMES. THEY MAY FIND THEIR BUDGET IS A IT WILL BUILT MORE DIFFICULT TO MEET. FOR THE GENERAL OPERATION I THINK THE IMPACT WILL BE INPERCEPTIBLE. DO YOU THINK THE SALES TAX IS A GOOD OPTION FOR SAN DIEGO OR ARE THERE OTHER THINGS THAT WE HAVEN'T CONSIDERED YET? I THINK IT'S NOT NECESSARILY THE BEST OPTION, BUT IT'S THE ONLY ONE RIGHT NOW THAT ADDRESSES THIS BUDGET DEFICIT THAT WE HAVE. I THINK WHAT IS NEEDED I THINK WE NEED A BROADER TAX BASE HERE IN SAN DIEGO. WE'RE HEAVILY DEPENDENT ON THE SALES TAX, PROPERTY TAX BECAUSE OF THAT WE ARE REALLY VULNERABLE IN ECONOMIC DOWNTURN. THOSE SOURCES OF REVENUE DROP RAPIDLY. SO WE NEED A SITUATION WHERE THE TAX REVENUE IS MORE STABLE REGARDLESS OF WHERE WE ARE IN THE BUSINESS CYCLE. I WOULD LIKE TO SEE SOME THINGS LIKE FEES FOR TRASH COLLECTION FOR EXAMPLE. THAT WOULD TAKE AN AMENDMENT TO REVOKE THE PEOPLE'S ORDNANCE. SO THAT TAKES A LOT LONGER TO DO. DR. ALLEN THANK YOU VERY MUCH. THANK YOU.