Should Loveland eliminate its sales tax on food? I say no for three reasons;
- Elimination would cost the city $6.2 million per year.
- Elimination would remove the city’s most stable revenue source; the only one that will be there for us in good times and bad.
- Its negative effects can be mitigated.
First, how I rate a tax: Is it progressive or regressive, stable or volatile, painful or barely noticeable? Four examples:
Income tax: Progressive and barely noticeable, but volatile. In recessions, when we most need revenues, job losses cause revenue losses.
Sales tax: Preferred by voters, but very regressive, and drops off sharply in a recession. It is Loveland’s main source of revenue
Property tax: Progressive and fairly stable, but painful; requiring large sums of money to be paid twice per year.
Sales tax on food. Extremely stable and barely noticeable; but very regressive unless mitigated.
Mitigation: Loveland has a food tax rebate program and a food bank. The rebate program probably could be improved. The food bank, — where the poor can get free food, untaxed — sorely needs a better quality and supply of food. If we were to improve on those means of mitigation, we could continue the benefits of the food tax in good conscience — and for a lot less than $6.2 million per year.
We currently enjoy a recovery from the last recession; city revenues are up and expenses are down. We know that our economy cycles between recessions and recoveries, so there will be another recession. Let’s not make it worse than necessary. Now is a time for prudence, not for hog-wild spending and tax cuts. Let’s keep the food tax and improve its mitigation.