City dodges a bullet | Editorials

The city of St. Joseph received some good news regarding tax collections, despite economic disruption from the COVID-19 pandemic and the shelter-in-place orders.

Initial forecasts called for sales tax revenue to drop as much as 30%, which would have been a heavy blow for the city. Instead, sales tax revenue rose 1.3% for the fiscal year and 5% from July to November. It increased even more when factoring in the hotel/motel, local use tax and motor vehicle tax.

Stable tax revenue points to the resilience of the consumer, who remains a driving force for economic growth, and the impact of federal stimulus to help withstand the financial onslaught of the virus. It may reflect a local economy that doesn’t rely on outside tourism or big events as much as Kansas City or Branson.

But the city’s revenue picture should raise a few concerns, because stimulus funding runs dry at some point and it remains to be seen how much consumer behaviors change in the long term. Sales tax revenue was running 4.4% higher in April, indicating that collections didn’t collapse but they lost ground amid slowing business activity. Revenue tends to lag a few months behind the actual purchase date because the money is remitted from the state.

Going forward, the big question has to be whether people who have been cooped up at home will ever return to more traditional work and shopping habits when things return to normal. With retail spending, the pandemic may have accelerated online shopping trends and pushed consumers past some sort of virtual tipping point.

In Jefferson City, this prospect should prompt state lawmakers to reconsider a tax on online sales, a measure that would help counties and municipalities fund critical services. St. Joseph, for example, gets 27% of its revenue from sales tax.

Right now, Missouri is one of the few states without a sales tax that extends to the online marketplace, an omission that became more glaring when so many local businesses were shut down and Congress proved reluctant to provide stimulus funds directly for local and state budgets. Past attempts to enact an internet tax ran into snags, with lawmakers debating offsets to other taxes and the need for cities and counties to vote on a new tax.

Faced with a dire forecast in the spring, St. Joseph city officials might feel as if they dodged a bullet. But there’s no doubt that an online tax would have mitigated the impact of an extraordinary event like a pandemic. There’s also no doubt that the trend toward online purchases will continue to grow.

Lawmakers should make another strong push this year in getting Missouri to join the 21st century with its sales tax structure.

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