Editorial: Plug sales tax leakage

  • Wednesday, January 3, 2007 4:00pm
  • Opinion

The economic development community has a new catch phrase it’s been bandying about in recent months: sales tax leakage.

Such leakage occurs when Island County residents travel elsewhere to do their shopping. On North Whidbey, most of this leakage takes place at the huge shopping malls and big-box stores in Burlington and Bellingham, while on South Whidbey the leakage occurs in Everett and Lynnwood.

The idea is to stop this leakage, and that’s a good idea. Island County dollars spent elsewhere means tax revenues generated by those dollars are spent elsewhere. Skagit County, for example, uses money spent by Island County residents for its own transit services, police needs and other government necessities. Meanwhile, back on Whidbey Island, local governments are losing significant funding when residents spend their money elsewhere.

The problem is obvious, but the solution sought by the economic development community is not a good one. The idea is to plunk a Fred Meyer or Costco onto some rural acreage outside of Oak Harbor, thereby compelling more islanders to shop locally.

This is bad for two reasons: First, it destroys the rural lifestyle that is Island County’s main selling point to tourists and businesses. And two, the strategy is bound to fail. No matter how many strip malls and big box stores are allowed on Whidbey Island, the shopping will always be greener on the other side of the bridge or ferry route.

What is needed is sales tax equalization. This is hardly a news flash. Islanders have been working toward this goal for years in Olympia. Simply calculate how many dollars islanders spend off-island, and then have the state kick back those tax revenues to the local community. That way, Skagit County or Snohomish County wouldn’t be getting our tax dollars.

The big counties don’t like the idea of losing money, of course. But there are larger issues at stake. Certain counties such as Island are designated “rural” by the state. It should be a state priority to keep these counties rural, and that means letting them keep their own tax dollars. Besides, the amount of money islanders spend in Skagit and Snohomish counties is chicken feed to them, but not to us. It’s only right that we be allowed to keep the money.

The Legislature convenes next week in Olympia. Sales tax equalization should be a top priority for the 10th District’s delegation, and county, city and town officials should work hard to help them achieve this goal. It will help keep Island County rural while providing desperately-needed tax dollars to our local communities. It doesn’t get any more “win-win” than that.

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