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Senate Moves Forward with Grocery Tax Repeal without Protecting Revenue Sharing

Posted By Justin Ruen, Friday, March 17, 2017

In a dramatic turn of events Thursday afternoon, the Senate amended an income tax relief bill to strip out the income tax provisions and replace those provisions with repealing the sales tax on food. 

The amendment provides no replacement revenue for local governments’ sales tax revenue sharing and would result in a major financial hit to cities, counties and non-school special districts of about $27.5 million annually when fully implemented.  AIC is currently working on estimates to show the potential impact to each city and will share that information as soon as it is available.

House Bill 67 as amended will be debated and voted soon on the Senate floor. 

We ask city officials to contact members of the Senate and respectfully ask that revenue sharing be protected, either in the form of replacement revenue or a hold harmless provision that would establish a floor for distributions.

Some of the bill’s proponents argue that growth in sales tax revenue will be sufficient to protect local governments.  But growth in sales tax revenue isn’t guaranteed: in 2009 and 2010, revenue sharing funds to cities declined 17%. 

There is also valid concern about stability of sales tax revenue.  The revenue from the sales tax on food is the most stable part of the state's sales tax revenue.  If legislators approve repealing the sales tax on groceries and the economy then goes into a downturn, the negative impact to sales tax revenue and revenue sharing will be magnified.  

We respect legislators’ desire to provide tax relief in a way that looks out for the most vulnerable members of our society, but it is important that this tax relief be done in such a way that cities are not forced to cut police or fire protection, or raise property taxes.

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