Mayor Marvin's Column: Dollars and Common Cents

In the past, I was always a bit envious of the communities that had space for large stores that generated significant sales volume, under the mistaken belief that a local community’s share of sales tax revenue was directly related to the volume of sales generated within their community. The relationship is slightly more tenuous.

Municipalities in Westchester County, with the exclusion of certain cities such as Yonkers, White Plains and Mount Vernon who have a different distribution formula, receive a per capita share of the 1% of the 7.375% State and local sales tax that filters down to municipalities.

The per capita number is based on community population as calculated by the U.S. Census. This is the compelling reason why the Village is vigorously challenging our low census count in the 2010 survey.

In our budget of approximately $13 million, we anticipate sales tax revenue of $850,000. In the six months from June 1, 2011 to November 30, 2011, the Village has already received $417,000 of our estimated revenue. This amount bodes extremely well for the Village as our share of the traditionally highest revenue months of December and January has yet to be received.

As a further encouraging sign, sales tax revenues has been inching up since 2010 and the County projects a 2% sales tax revenue increase for municipalities in the coming year.

Starting at the State government level, a 7.375% tax is added to purchases made in Westchester County. Of this amount, 4% remains at the State level and .375% is directed to the MTA budget. Westchester County government receives the remaining 3%; 2% is retained at the County level, .25% goes to school districts and .75% is directed to municipalities, save for the exempted cities with the different distribution formula.

Therefore, all sales transacted in the municipalities covered by this formula are aggregated into a pot from which all municipalities then derive their per capita portion of the sales tax so generated. The communities who house the larger stores derived no extra sales tax benefit.

The more national trend in sales tax revenue is not on as positive a trajectory. There is now data out that proves that as a percentage of household income, the average amount of sales tax paid by Americans last year was the lowest since 1967. The shift is primarily the result of the meteoric rise in Internet sales coupled with the continued purchase of non-taxable services despite the economic downturn.

As an illustration, a family that is currently squeezed financially will still pay college tuition, medical costs and purchase small services such as haircuts and pet care, all non-taxable, while foregoing the purchase of new taxable goods such as cars and furniture. As a result, taxable items purchased account for just one-third of spending today, down from one-half in 1970. As spending patterns trend toward tax free Internet purchases and untaxed services, the number one source of income for State and local government is fast eroding.

As a consequence of the decline in taxable purchasing, State governments have been forced to increase sales tax rates to achieve the same revenue numbers creating a Catch-22.

As State sales tax rates rise, consumers then go on-line more often or make large taxable purchases in nearby lower taxed states. Having family in both Massachusetts and New Hampshire, I have a bird’s eye view of the pattern. New Hampshire (0% sales tax) has bustling shopping malls all along its border with Massachusetts which collects 7% sales tax on the very same merchandise.

Two states, Massachusetts and Florida, tried to levy sales tax on services in an effort to then simultaneously lower the sales tax on goods but both states repealed their laws soon after enactment due to taxpayer and special interest protests.

I close by harkening back to my time worn mantra that as you make the tax free Amazon purchase, take a moment to think locally and question whether this purchase is a benefit to not only you, but perhaps the community.

I would posit that the 7.375% “extra” you pay for the same gift in the Village reverberates positively in many directions for Bronxville. The Village is receiving its proportionate share of the sales tax revenue which directly affects local revenues and property taxes. As illustration, a $79,130 swing in either expenses or revenues in the Village budget results in a full 1% increase in Village taxes.

In addition, when one looks at the donor list to any local school or charity, you never see Amazon, Home Depot or Overstock.com. Further, a vibrant business district fueled and maintained with local support has a direct effect on surrounding home values.

Purchases made in Bronxville and Westchester at large prove to be dollars well spent in preservation of our community.