Possible Sales Tax Hike in Wake of Using City’s Reserves

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(Memphis) Mayor A C Wharton said he would push for a half-cent sales tax increase to rebuild the reserve funds used to balance the budget for 2012-2013.

The budget approved Tuesday night lowered property taxes by eight cents per $100 of assessed value. For a Memphian who owns a $100,000 home, that comes out to about a $20 savings.

To make that happen, city council members dipped into the reserve fund, used money from future retirees’ pension benefits and money from the sale of the defense depot. They also made cuts to certain services and increased the cost of health insurance for city employees.

Mayor Wharton, who has said he did not want to take out of the reserve fund, said Wednesday, “I’m worried about it, but I’m also confident that we’ll be able to start rebuilding that reserve fund. This is why I’m going all out for the sales tax.”

The adopted budget is based largely on Harold Collins’ proposal. While Collins and Wharton may not have had the same ideas about balancing the budget, they both seem to like the idea of a sales tax increase.

Collins said Memphians would not be the only ones paying it.

“People outside of Memphis can participate in helping us keep our streets paved, help us protect our streets, with our police and fire, help us hopefully keep our streets clean from debris,” he said.

But the local AFSCME executive director, Chad Johnson, who represents a lot of city employees, said that a higher sales tax would hurt the poorest.

“A lot of people will stop buying things. Or buy fewer things. Or buy things outside our jurisdiction,” he said.

Johnson also disapproves of the higher cost of health insurance to city employees, who already received pay cuts and increased premiums.

He said that instead of a higher sales tax, he would encourage corporations in Memphis with tax-abatement incentives to pay their fair share just for a year. This option has not been discussed in-depth by the full council.

Wharton said the reappraisal of properties next year will most likely bring revenue down.

“This is a gap budget. Let’s get through this year and really go to work in earnest for years FY 14-18, which are really rough years.”

The city council will soon consider sending the sales tax increase to a vote among the citizens.