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Oct 29

Tough Choices - Again

Posted on October 29, 2019 at 2:10 PM by County Council

In December 2016, I wrote an article for the County's e-Connection newsletter called “Tough Choices” that reported on the growing budgetary challenges faced by St. Charles County. At that time, the County Executive and County Council were grappling with finalizing the 2017 budget. The steady growth rate in the County population, declining growth rate of sales tax revenues and increased cost of operations (especially in the area of law enforcement) were the primary issues facing us at that time.

Unfortunately, in the three years since that article, our situation has not improved despite very favorable economic conditions, record lows in county unemployment, increased county population, and a strong real estate market. The growth rate in our sales tax revenue, which funds nearly 60 percent of the County General Fund Budget, has declined from 5.21 percent in 2015 to 1.84 percent last year. We believe the main contributor to this decline is the rapid growth in recent years of Internet shopping, which is replacing traditional retail store purchasing. In recent months, Sears and K-Mart have announced closing store locations in our region, and it’s no secret that vacancy rates in local shopping malls are on the rise. E-commerce sales do not generate sales tax dollars to our General Fund, which means that as Internet shopping continues to grow, General Fund revenue growth shrinks.

As the result of these pressures on the General Fund, our reserves have begun to erode, and deficit spending will expand in future years. This pattern produces significant challenges in our ability to keep the Police Department and other public safety functions such as the County Jail, Courts, Prosecuting Attorney and Public Health Department properly funded to keep pace with our growing population.

One potential remedy to this dilemma lies in the June 21, 2018, decision by the United States Supreme Court to overturn its 1992 decision which effectively exempted e-commerce sales from taxation. This means states now have the ability to enact taxing measures on e-commerce. Sadly, here in Missouri, our state legislators showed little interest in trying to bring this about during the 2019 legislative session despite support for online taxation by Governor Mike Parson. It is clear that the State of Missouri and our local city and county governments are missing out on $280 million of lost revenue they could have collected under last year’s U.S. Supreme Court ruling.

Forty-five states have sales taxes and only Missouri and Florida now exempt online sales. Is it fair to our county’s businesses that collect and remit sales taxes, support our schools and fire districts with property taxes, and sponsor our ball teams and local charities to continue on with sales tax exemptions for their online competitors? For the good of your local governments and the “mom and pop” shops in our communities, please consider asking your state senator or representative to end the unfair free ride internet retailers are getting on sales taxes.