WA governments see increase in sales tax revenue during pandemic
The coronavirus pandemic has caused governments to tighten their purse strings for fear of the unknown, but the pandemic could have been a financial gain for state and local governments.
It turns out that when the majority of the population is stuck at home, purchases actually increase.
Over the past 21 months, more than ever have shopped online, having their packages delivered to their doorsteps, resulting in increased taxes for the jurisdiction where they live.
âEvery month that this sales tax was well collected, it was another month that I was like, ‘OK, great. “When will the other shoe fall off?” But he has maintained it ever since, âsaid Puyallup CFO Barbara Lopez.
The Washington State Department of Revenue told the News Tribune that in its most recent data, sales tax collected statewide increased 33.6% from June 2020 to June 2021. Much of it of this increase came from retail trade such as clothing, furniture and cars.
Financial staff in Pierce County, Tacoma, Lakewood and Puyallup have all seen an increase in their sales tax collection, large enough to make up for losses from other taxes such as admission fees, parking fees. and hotel.
âIt helped keep the economy going during the pandemic,â said Julie Demuth, Pierce County budget manager.
Demuth attributed the increase to more home deliveries by online shoppers, a shift in shopping from cities where people work to their places of residence, and federal household assistance, allowances to l rental aid.
In 2020 and 2021, sales taxes have returned higher than expected. Pierce County saw sales tax revenue rise from $ 128.6 million in 2019 to $ 141.4 million in 2021. The two years of the pandemic were more profitable in sales revenue than the previous one , according to data provided by Pierce County. The county’s 2020-2021 biennial budget is $ 2.4 billion.
Demuth, who has worked in the county for nearly a decade, said she had never seen such an increase in sales tax revenue.
Tacoma also reported an overall increase in sales revenue since 2019. Last year, the board adopted a budget of $ 3.67 billion for 2021-2022. Financial analyst Reid Bennion said sales tax in 2020 was down $ 4 million from the previous year – $ 53.4 million to $ 49.4 million – but jumped 16% to $ 57.7 million in 2021.
He’s happy to see the excess sales tax revenue, but said it’s not enough to cover the economic toll that residents and businesses of Tacoma have paid during the pandemic. He saw a decline in restaurant and venue sales and an increased need for homeless services and housing.
âSales tax is good, but it doesn’t compensate for the other needs that we’re seeing in the community,â Bennion said.
Overall, Puyallup has seen its sales tax increase by 13% this year from 2019, offsetting the loss of the admission tax to events like the Washington State Fair, construction fees and hotels. Puyallup City Council has approved a two-year budget for 2021-2022 of $ 245 million.
Puyallup has benefited greatly from car sales at dealerships this year – a 22% increase from 2020, Lopez said. Half of the sales tax for the general fund comes from car sales, and Lopez said she was happy with the consumer confidence.
Lakewood City Manager John Caufield said the city saw lower collections for the gambling tax, admission tax, parks and recreation fees, vehicle fuel tax motor vehicle and hotel / motel lodging tax once the pandemic hits. In March, the city put all general government spending on hiatus and did not have to cut programs or services.
The city was expecting an overall drop in revenue of nearly 14% at the start of the year, Caulfield said in an email. Compared to 2019, Lakewood saw its revenue decline by just $ 8,960 or 0.1% in 2020.
The sales tax collected by Lakewood is 22.4% higher than budget estimates in 2021, Caulfield said. In its biennial budget, Lakewood allocated $ 91.5 million for 2021 and $ 91 million for 2022.
Pierce County, Tacoma, Lakewood and Puyallup did not expect a windfall of additional dollars during the pandemic. In March 2020, they cut spending by freezing hiring, suspending fleet vehicle purchases and suspending road projects.
After the first year of the pandemic, many decided to ease austerity measures by hiring for open positions and restarting projects.
âWe lost income during 2020, but it wasn’t as bad as we initially thought,â Lopez said.
The additional millions of dollars will be largely spent in a prudent manner, according to government finance experts.
Pierce County has allocated unexpected funding for more public safety, criminal justice reform and a new electoral center.
Tacoma said there would be budget issues if the sales tax didn’t yield more than expected to cover expected returns from lower income sources, like parking and driveways. The increase in sales tax revenue will go a long way towards paying off the debt that parking fees normally do.
âIf we didn’t have this buffer in the general fund, we would be in trouble,â Bennion said.
Puyallup council had an additional $ 3 million unbudgeted this year, choosing to fund the Safe Routes to School program to improve sidewalks for students, add a new billing system and bolster the city’s reserves, Lopez said.
Lakewood used the additional funds – $ 3.6 million – for capital improvements and other one-time investments, such as creating an economic development opportunity for businesses in its 2022 budget, Caulfield said in an e -mail.
While there probably isn’t such a big increase in sales tax increases, many local governments expect the increased use of online shopping to continue.
âI don’t have a magic crystal ball or anything like that, but it seems pretty durable at this level,â Lopez said of Puyallup’s sales tax collections.