Council considers taxing food rather than property
Grand Junction City Council directed staff to prepare a report about how a tax on food sales would impact seniors and the poor should voters decide to tax groceries instead of real property.
The directive was issued as staff took council on a tour of tax policy and economic development opportunities during the Friday morning session of a daylong council retreat at Hope- West.
No official action was taken.
Such a dramatic shift in tax policy would require an election by city voters, Mayor Phyllis Norris said.
A tax on food is a way to make sure “everybody pays their fair share,” Norris said.
Councilman Bennett Boeschenstein said he opposed taxes on food as regressive, with seniors and the poor taking the brunt of the burden because a larger percentage of their income goes to food. Boeschenstein urged council not to study the question further.
The shift would undoubtedly increase revenue to the city. Further study could show the reduction in property tax will ultimately offset the added cost of food tax, City Manager Rich Englehart said.
The tax on food also has the benefit of stability since all taxpayers eat at a fairly constant rate. Planning economic development is more difficult when tax revenue is saddled to the ups and downs of real property values, Norris said.
After some more discussion, council directed staff to study the impacts of a food tax and report at a later meeting.
Staff conceded the city is running out of areas where it can decrease costs for private business through tax policy since Grand Junction is already one of the more business-friendly cities in the state on several counts, according to a staff report.
Out of 21 cities, Grand Junction has the third-lowest municipal sales tax rate, no business license requirement and a plethora of tax exemptions, the report said.
The city is losing out on millions of dollars in potential revenue because the oil and gas and construction industries are beneficiaries of tremendous use tax exemptions, some of which no other city in the state offers.
For example, certain construction firms with headquarters in the city need to pay use tax only on projects completed within the city. Business generated outside the city is exempt from the tax under the city’s unique scheme.
Use tax is a tax on tangible personal property purchased for use, storage or consumption, but not for resale, as is the case with building supplies.
While the scheme definitely attracts businesses to have headquarters in Grand Junction, it also forgoes millions of dollars in revenue to the city, revenue other cities use auditors to collect, according to staff.
In some cases, construction firms pay use tax on only 10 percent of the building materials they store and consume, because 90 percent of the materials are used for projects outside the city, staff reported.