Politicians and special pleaders love the sales tax. They know that very few people look at the receipt they pick up at every checkout counter to see how much sales tax they just paid.
Compared to income or property taxes, sales taxes are virtually invisible. Therefore, when somebody wants more tax revenue, they know that seeking a sales tax increase will cause the minimum amount of negative reaction and political kickback.
A good recent example is the 3/16-cent sales tax increase that passed in St. Louis and St. Louis County to raise money for parks and renovation of the Arch. In the publicity selling it to voters, it was described as costing only 2 cents on a $10 purchase.
But in many areas of the city of St. Louis, the total state and local sales tax rate will go up to 12.1785 percent when the Arch tax is added Oct. 1. Round it off at 12 percent, and the cost will be $1.20 on a $10 purchase. If you blunder into eating at a restaurant in one of these “special tax districts,†that’s how much sales tax you will pay.
People are also reading…
St. Louis County has scores of special tax districts. All of them are lower than the city of St. Louis because the county does not have as many special dedicated sales tax rates as the city. The highest in the county, after the 3/16-cent Arch tax is added, will be Edmundson at 10.865 percent. Most of the county tax districts range between 8 and 9 percent.
The Missouri Department of Revenue collects the state and local sales taxes and distributes the money to more than 2,100 separate taxing districts.
According to the Revenue Department, the state sales tax of 4.225 percent breaks down into 3 percent for general revenue, 1 percent for education, 0.125 percent for the Conservation Department and 0.1 percent for parks and soil conservation.
According to the budget of the city of St. Louis, the city sales tax (before the Arch tax is added) breaks down as follows:
- 1.875 percent for city general revenue and capital improvements.
- 1.5 percent restaurant tax to pay off convention center bonds, and for Grand Center and general revenue.
- 1 percent for Metro buses and rail transit.
- 0.666 percent for education.
- 0.5 percent for public safety.
- 0.225 percent for parks.
These are sales taxes collected throughout the entire city. On top of these are added the special sales taxes authorized by local governments for business areas or tax increment financing projects. The special taxing districts can collect up to 2 cents in additional sales taxes. That would be 1 cent for a Community Improvement District and 1 cent for a Transportation Development District.
This extra sales tax is used to pay for the additional services that the property owners in the district want, or to pay off bonds issued to finance them. TIF bonds are issued by the city. The money raised by the bonds is used to subsidize whatever development is granted a TIF by the city government. Then the taxes produced in the development are used to pay off the bonds.
There are 15 of these CID and TDD taxing districts in the city. A good example is the Renaissance Grand hotel, which is the city’s convention center hotel. Investors who bought bonds used to build the hotel foreclosed in 2009, and they are still trying to find a buyer.
The pipeline is full of future sales tax increases. Missouri politicians in Jefferson City are talking about a sales tax increase for pay for road construction, and another sales tax to replace the state income tax.
Everett Dirksen was a former Republican senator from Illinois. He is credited with saying, “A billion dollars here and a billion dollars there. First thing you know, you’re talking about real money.â€
To paraphrase, 1/8-cent here, 3/16-cents there. First thing you know, you’re talking about real money.
Fred Lindecke is a retired reporter for the Post-Dispatch.
