By R.D. Fish

When Stover Mayor Brenda Steffens loaned me a spreadsheet showing sales tax rates and revenues of every Missouri town with a population less than 2,500, I saw a chance for some data mining fun. When Stover Mayor Brenda Steffens loaned me a spreadsheet showing sales tax rates and revenues of every Missouri town with a population less than 2,500, I saw a chance for some data mining fun. “Data mining” means digging through columns and rows of numbers, in search of golden nuggets of information. Overhearing me rejoicing about this statistical motherlode, publisher Bryan Jones said, “Some people have a funny idea of fun.” The prospect of prospecting for data excited me after the Monday, July 31 town meeting at the Stover Lions Club building, where Stover resident Steve Eckhoff asked Steffens whether a raise in the city’s sales tax rate would enable the city to fund more self-improvement projects, without resorting to bond issues, matching grants, or a search for donors and volunteers. Eckhoff, Steffens, and others pointed out the sales tax generates revenue in proportion to the success of local business. Not only citizens, but visitors who shop in Stover contribute to this revenue. Stover has a total sales tax rate of 1.5, including one percent for the general fund and 0.5 percent earmarked for transportation.  According to the spreadsheet, that brings an annual revenue on the order of $179,191, of which $59,730 goes toward transportation. That means it may take up to three years for the city to save enough half-cent tax money to pave a street, like the five-block stretch of Second Street it did last year at a cost of $145,000. So, the question driving my data-mining is: Do the statistics for towns similar in size to Stover show a connection between sales tax rates and revenue? Can the example of other towns in Missouri suggest an optimal sales tax rate for us?Population 1,xxx The amount of material is daunting. To tighten the focus, let’s consider only the statistics for towns between 1,000 and 2,000 in population. That narrows the scope to only 91 towns, which I think is plenty. Stover, with a population of 1,074, ranks sixth from the bottom of that list by size. Of those 91 towns, 23 have a total sales tax less than 1.5 percent. Stover is one of 24 towns taxing at exactly 1.5 percent.  From there, the rates go up by increments as small as one-eighth of a percent. Eight Missouri towns in the 1,xxx population bracket tax sales at 1.75 percent, 17 at two percent, seven at 2.5 percent, two at 2.75.  Topping the sample group are Pierce City at 2.875 percent, and Purdy at three percent. Another thing the spreadsheet shows is how those “total tax rate” figures break down into separate, non-transferrable funds, like Stover’s half-cent transportation tax.  For example, Adrian, pop. 1,622, splits its 2.75 total rate into 1.375 cents for the general fund, a half-cent for transportation, another half-cent for capital improvement, a quarter-cent for fire safety, and an eighth-cent for miscellaneous. Many cities also have special sales tax funds for stormwater/parks. Sorting this population group by the total revenue each city’s sales taxes bring in, Stover ranks 54th of 91. Only 14 towns on the list make less than $100,000 a year, bottoming out with Gideon at $36,481, Taos at $31,301, and Lake Winnebago at $30,464.  Both Gideon and Taos have one-cent total tax rates, Lake Winnebago only a half-cent. It is the cities at the top of the list that really bust the curve. There are 22 towns collecting sales taxes in the $200,000 range; another 25 take in $300,000 to $1 million. Doniphan and Piedmont, both in southeast Missouri, rake in more than $1 million a year, taxing at two and 2.5 percent respectively. Lake Ozark leaves the rest in the dust with a $2,936,669 in revenue on a 2.75-percent tax rate. To give Stover the benefit of a fairer comparison, let’s drill a bit deeper into this data mine. How does Stover compare to other cities with both a 1,xxxx population and the same, 1.5-cent-on-the-dollar sales tax?Dollars to dollars Out of 24 towns in this smaller sample, Stover is fourth-smallest in population, but it ranks 12th in total revenue. The best performer in this sub-group is Anderson, with sales tax revenue of $366,093. Nine other towns make more than $200,000.  Only one town in Stover’s size range, and with Stover’s tax rate, makes less than $100,000 – Merriam Woods, earning $44,034.Donuts to donuts Another way to drill deeper is to take a smaller sample. Stover is close to the bottom of the population rankings in the 1,xxx size group. So how about pitting Stover against cities within a population range of 200? Of 26 Missouri cities with a population of 1,000 to 1,200, Stover ranks 21st in size, and is one of 10 towns with a 1.5-percent total rate.  Stover’s sales tax revenue ranks eighth in this group. Of the seven towns performing better, three – King City, Cole Camp, and Mound City – are in the 1.5-percent bracket. The other four all have higher rates, including Glasgow (1.75 percent), Lone Jack (two percent), and Appleton City (2.375 percent).Paris (two percent) tops this list with a revenue of $264,914.Complex stuff Whatever all this means, it  doesn’t rise to the level of statistical science, by a long chalk. This data mine is veined with complexities that will frustrate any prospective prospector’s efforts to draw firm conclusions based on mere population, tax rate, and revenue statistics. First, some of these communities are well positioned to do a lot more business than most; for example, at the top of a ramp off the interstate, in a busy suburban area, or at Tourism Grand Central, like Lake Ozark. Second, increases in sales taxes are all right up to a point – a delicate, hard-to-guess point, above which the added tax burden hurts local business, and so lowers tax revenue. Third, a community that doesn’t keep its streets and public works in good shape risks hurting business, in spite of the intentions keeping its tax rates down. So, simply trusting lower sales taxes to boost business doesn’t necessarily work, either. Now, with these thoughts in mind, witness some of the oddities I dug out of my data mine. The city of Linn, in Osage County, pop. 1,429, has a sales tax rate of one percent and annual revenue of $239,594. Linn Creek, in Camden County, pop. 244, levies a sales tax of 3.25 cents on the dollar, and earns $279,752. So, in spite of a much higher tax rate, it only brings in a little more money – a let-down only partly attributable to the town’s smaller size. The size of the city may, infact, be largely irrelevant. What kind of business it does, and where it does it, may count for a lot more. For example, King City, pop. 1,006, near the Iowa line, has a tax rate of 1.5 percent and $189,061 in revenue. Meanwhile, in Kingdom City, pop. 130, a two-percent sales tax brings in $589,824 a year. Similar populations and tax rates don’t always translate into simlar revenue. Piedmont, pop. 1,977, earns $1,135,989 on a 2.5-percent sales tax; Pierce City, pop. 1,279, gets only $220,264 out of 2.875 percent. Nor does a wide difference in tax rates imply vastly different results. Salisbury taxes at 1.375 percent and gets $312,540, while Sarcoxie taxes at 2.5 percent and takes $330,018.  And let’s not forget Purdy, whose 3 percent tax rate scrapes in only $145,843.Conclusions? Most, but not all, of the cities that make more sales tax revenue than Stover, also have higher tax rates.  Exceptions include Unionville, Salisbury, Seymour, Mansfield, Memphis, Milan, and Linn, which actually tax at lower rates but realize more revenue than Stover does. Most, but not all, of the cities that have higher sales taxes than Stover, receive more revenue from them.  Towns that tax more but earn less include Carterville, Maysville, Humansville, Wellsville, New Franklin, Purdy (gulp), and Kaysinger’s very own La Monte, which brings in $85,920 on a two-percent sales tax. But as a general rule, if one can be mined from this bottomless pit of data, a small increase in the sales tax rate seems to lead to a disproportionate increase in revenue.  That’s money a city can use to fund improvements, which may help local businesses attract more paying customers. Supposing, for the sake of keeping the math simple, Stover levied the same volume of sales at a higher rate? Compared to $179,191 at 1.5 percent, the revenue would be $194,124 at 1.625 percent; $209,056 at 1.75 percent; $223,989 at 1.875 percent; or perhaps $238,921 at two percent. The difference could take the form of streets being repaved more often. Within reasonable limits – though I don’t know exactly what those limits are – my advice is: If our city council asks you to let it raise the local sales tax, support it.

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