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McKinstry: Sales taxes a shaky source of revenue
If recent figures from counties in New York State show anything, it’s that sales taxes are largely unreliable revenue sources that often fluctuate with local economic anomalies.
Rockland County, for instance, has seen repeated declines in sales tax revenues, fueling a debate over whether raising the tax actually drives shoppers elsewhere, like across the state line to New Jersey.
It’s a legitimate concern. If shoppers must pay more, will they go elsewhere?
This last quarter, which covers April through June, sales tax revenues fell 0.81 percent, surprising Rockland officials, who attributed the decline to wary shoppers and the closing of the Nanuet mall.
Efforts to raise Rockland’s sales tax from 8.375 percent to 8.75 percent — as a way to pay off a projected deficit of $80 million and growing — failed as the State Legislature didn’t have the appetite to allow an increase.
On Long Island, Nassau County saw its sales tax revenue jump by 4.36 percent in the April-June quarter. Suffolk’s rose by 3.54 percent, prompting a lawmaker to credit East End summer tourism for the growth.
Officials in upstate Broome County credited a nearly 12 percent spike to insurance companies: Checks for storm-related damages from Tropical Storm Lee finally reached homeowners, who spent those dollars on home repairs.
In Westchester — where lawmakers have long made sales tax predictions a political sport — Republican leaders said the relatively flat 0.2 percent growth showed the slow and inconsistent nature of an economic recovery.
There are ebbs of flows to the economy, and predicting how much counties will collect in sales tax revenues may be a combination of art and science — and a little bit of luck. But overly optimistic projections aren’t something you want to bank on.