Chelsea, Alabama is considering a sales tax hike. This would increase the sales tax within the city from 9% to 10%. These are the notes from which I delivered a very brief statement against the Chelsea Sales Tax Hike at the public hearing held July 16.
This is the perfect time to discuss the sales tax proposal. This weekend is the Sales Tax Holiday.
If our sales tax is so low, why do we need a holiday from it?
What does this tell us? That we are taxed too little?
No. We are taxed too much.
If we need tax relief, then why even consider a tax increase?
This tax increase is a bad idea.
It is a bad idea because economic research shows that sales tax hikes harm employment and depress economic activity in a region. Economists have studied this since the 1960s and found in the United States and other countries, people avoid taxes.
This is human nature.
We can pretend human nature doesn’t exist. However, leaders deal with facts and not feels.
Raising the sales tax rate will send some people the message that Chelsea is not business friendly.
They may think twice before opening a small business here.
They may think twice before buying a house here.
Chelsea will grow. Tax revenues will increase, but the best foundation for our community is to grow its tax base instead of the short-term solution of a tax hike.
For every 1% increase in the sales tax rate, research found a 7% decrease in food sales.
Tax arbitrage opportunities drive commercial activity on durable goods, and as shopping patterns change, even non-durable goods. Research found this decreases employment in higher sales tax locations.
The evidence of science testifies against the wisdom of tax hikes.
However, there are other reasons to oppose this tax hike.
Sales taxes are inherently regressive. They harm the poor, elderly and anyone on a fixed income.
Also, raising taxes sends the wrong message. It is bad for Chelsea’s brand. We should be pro-business and pro-family.
We should be a community committed to letting people keep more of their paycheck.
Let other cities be the high tax communities. We can do better.
What we do now will help or harm Chelsea for many years.
A good tax policy will lay the foundation for continued growth. Growth that will increase commercial activity within the city—and bring more jobs and in time more tax revenue into the treasury.
Lastly, raising a local tax will only encourage the county school system to push off more of its responsibilities to the city. It is human nature that once they know a honeypot of $1.5 million is sitting there, waiting on projects to fund, that they will see fewer projects in Chelsea need system funding.
In closing, the arguments against the sales tax increase are two-fold. There are good scientific reasons to reject the tax increase. It is bad for business. There is also the moral argument against a tax increase. People ought to keep more of their money. And we should protect the poor, elderly and those on fixed incomes—but a sales tax hurts these groups most of all. That is immoral.
We can do better.
Better means rejecting this proposed Chelsea sales tax hike.