Press Release

Conference of Mayors Calls on Sales Tax Panel to Maintain Local Flexibility in Setting Tax Rates

Dearborn Mayor Urges Caution on Shifting to a Uniform Tax Base, Which Could Be 'Catastrophic' for Cities

October 26, 2000
Larry Jones or Jubi Headley
(202) 293-7330

Chicago, IL -- Dearborn Mayor Michael Guido, speaking on behalf of The United States Conference of Mayors, today appealed to officials working on streamlining sales and use taxes to avoid imposing the requirement of a single tax rate per state on state and local governments, and to allow local option taxes on remote sales.

Download a full copy of Mayor Guido's testimony.
"As Mayors, we strongly support the goals of the Streamlined Sales Tax Project, which are to simplify and modernize sales and use tax administration," Guido said in his testimony. "As you develop and finalize your plans for reforming our taxes, we strongly urge you to maintain local option tax rates. For many of our Mayors there is no issue more important than this. This will allow states to continue working with their local governments to choose the mix and the level of taxes that best suit their preferences, tradition and needs. We believe that's why 36 states have authorized a local option sales tax."

Mayor Guido, who chairs the Conference of Mayors' Urban Economic Policy Committee, was in Chicago today to testify before the Streamlined Sales Tax Project, a group of representatives of states convened to design, test and implement a plan that radically simplifies sales and use taxes.

At issue is how to design a system to collect sales tax on remote sales, largely via catalog and the Internet. Many Internet and catalog retailers have argued that it is simply too cumbersome and costly to collect taxes on remote sales for the thousands of taxing jurisdictions, each with its own sales tax rate. To address this issue a number of these retailers, with support from some members of Congress, have called for a 'single rate per state' requirement on all remote sales as a condition for merchants to collect taxes. Such a requirement would effectively eliminate the current local option tax on remote sales.

The Conference of Mayors, joined by other state and local officials, opposes the imposition of a single rate per state, pointing out that the single rate simply is not necessary, since software is currently being developed to provide merchants the tax rate of any locality based on the zip code of the purchaser. (The Streamlined Sales Tax Project is currently in the process of testing the software in four states.)

Furthermore, as Guido noted in his testimony, such a plan ignores the differences in each state among urban, suburban and rural areas, and among local traditions and community needs." We believe state and local tax rates should be set at the state level and not in Washington," Guido said. "In some instances these cities depend on sales and use taxes for over 50 percent of their revenues. Unlike their states, these cities do not have many other broad-based revenue options such as the income tax. When there is a huge difference between the local tax base and the state tax base, the local government could lose a significant amount in revenues."

Guido noted that a uniform tax base would have an adverse impact on cities such as Denver, which has a broader tax base than the state of Colorado. The city also administers its own taxes and conducts its own audits in a manner quite different from the state. In 1998, Guido noted, if the state had a uniform tax base and administered all state and local taxes, the city would have lost 27 percent of its total sales and use tax revenues.

"In cases like these, a solution must be found that will hold these cities harmless," Guido maintained. "The collection of taxes on remote sales will in no way make up the difference in revenues lost when there is a huge variance between the state and local tax base. Unless a solution is found, transferring to a uniform tax base could be catastrophic to such cities. At the very least, we would ask state officials involved in this Project as well as state legislators who will be involved later on to include Mayors and other local elected officials in your decision making process."

The United States Conference of Mayors is the official nonpartisan organization of cities with populations of 30,000 or more. There are about 1,100 such cities in the country today. Each city is represented in the Conference by its chief elected official, the mayor.