Opinion

Opposing viewpoints: Businesses will see downside to North Bend sales tax increase

In discussing the proposed sales tax increase with North Bend-area small-business owners, I began to get a very clear picture of the business climate in our community of approximately 5,700 people.

To be fair, there were several business operators that didn’t anticipate the sales tax increase would produce any negative impact on business. However, the majority of businesses I contacted indicated that taxes are already too high, and the proposed 0.2 percent increase would further subdue our already-tepid local economy.

Most believed that the city could continue to operate with current revenues by re-prioritizing and reducing redundancy in services. Several respondents, including one who anticipated no drop in business activity, wondered if TBD resources wouldn’t be better spent on more reliable and timely community transportation.

My favorite suggestion came from a long-time resident and owner of a prominent real estate office, who said, “An ad campaign promoting North Bend’s higher standard and lower cost of living would be more beneficial than increasing the sales tax.”

Studies compiled on this subject seem to agree with these community businesspeople. A number of years ago, Oregon abandoned a state sales tax proposal that would have raised the rate from 0 to 5 percent. A study concluded that the tax increase would decrease cross-border sales and reduce other tax revenues. Last year, the Freedom Foundation published a study on the impact of a 1 percent increase in Washington State’s sales tax. The study concluded that the sales tax increase would likely result in a net loss of 11,290 jobs, and put downward pressure on sales tax revenue statewide. Obviously, North Bend’s smaller population and the lower proposed tax increase would result in fewer job losses, but the loss of any job here seems to be a move in the wrong direction.

I sought out feedback from the city of Bellingham, which recently passed a TBD proposal similar to ours. The president of Bellingham’s Chamber of Commerce indicated that big-ticket retailers, specifically car dealerships, had noticed a drop in sales, presumably from consumers who perceived an economic advantage to spending their money in nearby communities with a lower sales tax rate.

On the flip side of the ledger is Covington. Prior to its incorporation in 1997, Covington had (and still has) many similarities to North Bend. Since its incorporation, Covington has experienced consistent business growth, and its population grew to 17,600. Key to their growth plan is an 8.6 percent sales tax and a 0 percent city B&O tax to attract larger businesses, consumers and new homeowners. Commercial tenant vacancy is at or near zero, and housing is almost entirely owner-occupied.

Our primary focus should be on bringing more people to live here and more businesses to sell goods and services here. The city’s coffers will grow naturally as business activity increases (sales, use, B&O taxes, licensing fees) and as more people buy homes (excise taxes) and raise families here (property taxes). Raising the sales tax during a recession seems to defy empirical findings. At a time when even the city of Seattle can lower its food and beverage tax rate, it only makes sense to say “not now” to new taxes.

• Mark Dilger is a contributor and author of the ‘con’ statement in the local voter’s pamphlet.

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