Marin Voice: Novato sales tax increase plan lacks creativity, foresight

This November, Marin County voters will face at least a dozen different local measures all seeking to raise revenue at a local level either through bonds or sales tax hikes.

In Novato, voters will likely be asked to weigh in on Measure C, a proposed sales tax increase which is likely, if it passes, to impact most Marin County shoppers. Only Novato voters will have an opportunity to vote on Measure C. However, almost everyone in Marin County is likely to be impacted by Measure C because, in my experience, almost everyone in Marin County shops at Novato’s Vintage Oaks Shopping Center.

Superficially, a sales tax hike seems like an easy way to raise revenue. While voters might not like to pay more, a fraction of a cent increase in the sales tax doesn’t seem like much money. And, many voters actually do find the idea of voting to tax other people – non-Novato residents who shop at Vintage Oaks, for instance – appealing.

However, sales tax increases can have a complex impact on an entire region, not just a single municipality.

The actual evidence regarding consumers’ reaction to specific sales tax environments is complex. Anyone who has spent time on the East Coast, where states are geographically smaller and shopping across state lines is common, realizes that low, or no, sales tax areas become shopping meccas.

New Jersey, for instance, does not impose a sales tax on most apparel. As a result, New Jersey’s long list of sales-tax-exempt consumer goods has made the malls in the Paramus borough a multi-generational destination for families from New York, Connecticut and Pennsylvania. Many typically travel to New Jersey once or twice a year specifically to buy new coats and shoes for winter.

From a business point of view, it could be argued that, while New Jersey is refraining from maximizing revenue by not taxing items other neighboring states tax, New Jersey, as a state, is actually making a smart financial decision by drawing more business there and, thus, increasing revenue.

No one in Marin is going to go out of state to buy shoes if the sales tax rate in Novato increases. However, migratory shopping patterns can impact entire regions. Anyone who has ever worked in retail knows that consumers are incredibly reactive and the retail world is continually evolving.

Proponents of sales tax increases have a tendency to see shoppers – taxpayers, residents and visitors – as a captive source of revenue. However, it could be that raising sales tax is not a smart, practical or easy way for a municipality to raise revenue if neighboring municipalities (or even neighboring counties) decide to take a more creative approach to revenue generation.

From my perspective, I think the most interesting thing about the conversation about Measure C at the Novato City Council meeting in mid-May involved a philosophical lack of creativity by merely raising the sales tax rate in an effort to raise revenue. City officials have been increasing the sales tax rate, or attempting to increase the sales tax rate, since 2010. It should be noted that, while the city has successfully increased the sales tax rate, the increase in revenue has done little to impact Novato’s chronic financial issues.

A really creative response to a municipal revenue shortfall involves asking some serious questions about the basic health of the local economy and how Novato has adapted (or not adapted) to regional trends. Why are there large, vacant retail buildings on Grant Street and South Novato Boulevard that aren’t generating any taxable revenue? I suspect that if Novato was more friendly to new businesses, there would be more local startups and, as a result, more potential taxable revenue.

These questions and concepts should be explored because, even if Marin officials aren’t asking studying them now, it is possible that in five or 10 years, officials in Vallejo, Rohnert Park, Petaluma or Santa Rosa do so.

Attempting to fix the same problem with the same “solution” that didn’t work last time suggests an impressive level of optimism and a depressing lack of creativity. Novato has real fiscal issues. Novato residents – and Marin shoppers – don’t deserve a sales tax hike that is unlikely to fix Novato’s chronic fiscal issues.

Sarah Nagle, of Novato, has 20 years experience in the retail industry.