The Oct. 27 Arizona Daily Sun article reported the shortfall in the city’s sales tax revenue as well as a reaction from the mayor. While the staff report did not provide additional insight by examining revenue changes by sectors that are subjected to sales tax, I was surprised to read about the various speculations floated by our elected officials; particularly, the baseless notion that people’s discretionary income has declined due to price hikes resulting from the minimum wage increases.
Two sectors that together account for more than 60 percent of all sales tax revenue — retail (49 percent) and restaurant and bars (13 percent) — also employ the majority of minimum wage workers; therefore, these sectors could have seen disproportional price increases. But they have actually grown significantly since the Flagstaff minimum wage went into effect in July 2017.
Retail sales tax revenue that accounts for nearly half of all sales tax revenue grew by 19 percent over the last two years and by nearly 8 percent in the last year. Sales tax revenue from restaurants and bars has been slightly down this year but only after an unprecedented growth of more than 36 percent the year before. Restaurants and bars are still up by nearly 26 percent over the two-year period. Thus, the projected $1 million sales tax revenue shortfall has nothing to do with retail and restaurants and bars.
What the sales tax revenue report from this July tells us is that the revenue from utilities, commercial property rental and construction contracting is all down. If we are concerned about the decline in community’s discretionary income — and as of now there’s no evidence of that -- I would look into the cost of housing and health care increases as possible culprits, which have absolutely nothing to do with minimum wage increases.
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I would also ask if the city’s sales tax revenue projection itself was not overly optimistic. Perhaps our expectations for the continued growth have been unrealistic.
Since 2014, I’ve spent a lot time studying and even legislating wage policies. In 2016, I led Flagstaff Living Wage Coalition in successfully passing our first local minimum wage law and then defending it against an attempted repeal. Both times, voters decidedly sided with working families.
The law is doing exactly what it was designed to do: raise the income for the bottom 20 percent of our workforce. As reported by the Arizona Daily Sun in April, the local law has also positively affected workers outside of the city limits and is helping to reduce staff turnover, which benefits businesses and their employees alike.
The minimum wage policy is not a cure for all societal ills and is just one of many tools we have. We still need real affordable housing, universal health care and child care, and other policies addressing the inequality that keeps a growing number of people living with stress and insecurity.