Payroll Tax?

County lawmakers may take a look at one.

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Some of his colleagues have already expressed misgivings, and some are evidently wide open to the prospect, but, whatever the case and ready or not, Shelby County commissioner John Willingham has prepared a version of what from his hand or someone else's is likely to be the next new thing -- and the focus of the next new battle: a payroll tax.

Moreover, he's won the conditional support of an important ally, Cleo Kirk, the commission's budget chairman.

The idea for such a tax arose several months back when county mayor A C Wharton, facing a budget crisis and looking for some revenue source besides that of a property-tax increase, proposed what he called an "altered facilities tax." That was a diplomatic way of saying "impact fee," and the county's developers massed impressively at a subsequent meeting of the Shelby County Commission to turn it aside.

Wharton had another ace up his sleeve, though. He had already discussed the idea of a payroll tax as a fallback possibility with Commissioner Deidre Malone, and Malone dutifully put the idea forth during public discussion of the altered facilities measure (which would end up being tabled for further study next year). Commissioner Michael Hooks, a Democrat like Malone, promptly took the bait, and so did Republican Willingham.

Currently engaged in an underdog campaign for Memphis mayor against incumbent Willie Herenton, Willingham is not reticent about committing himself to innovative formulas (e.g., converting The Pyramid into a downtown casino).

Nor is Willingham bashful about overlapping his mayoral candidacy with proposals that do double duty on the commission agenda.

Bruce Thompson and David Lillard, two freshman commissioners who have assumed the mantle of conservative reformers, are on record as doubting the efficacy of a payroll tax, with Lillard suggesting last week that such a tax would "probably cost the county jobs." But Joyce Avery, another first-termer who, like Thompson and Lillard, is a Republican and a conservative, is reportedly open to the idea. And so are Malone and Hooks, of course.

So, too, it turns out, is budget chairman Kirk, a Democrat whose willingness to compromise on a 25 cent tax-rate increase (Kirk, like commission chairman Walter Bailey, wanted more to take care of school operating costs) enabled last week's decisive vote for a county budget after months of agonizing deliberation.

"I'm interested in the advantages of a payroll tax. Each year we go through all this intense anxiety over increasing the tax burden on property owners, and each year we go through this concern about finding alternative revenue sources. I think it's time for something like this," said Kirk, who went on to say, "If John's figures are right, and if the legislature gives it approval, I think we're three-quarters of the way there already."

Here are Willingham's figures, through at least seven drafts of his proposal: Setting the proposed payroll-tax rate at 2.5 percent, and assessing that against an estimated annual payroll amount of $19 billion-plus, would yield annual revenues in the neighborhood of $476 million. (For purposes of comparison, Wharton's proposed altered facilities tax would have netted something like $4 million.) That level of revenue collections, estimates the commissioner, would allow the outright abolition of the county wheel tax ($141 million, annually), a rollback of this year's property-tax increase and one from two years ago (totaling $94 million), and the reduction of the county's sales-tax portion from 9 and a quarter percent to 7 percent ($124 million).

The tax, according to Willingham, would provide enough extra revenue to subsidize Oakville Sanitarium, Head Start, and The Med at currently suggested or, in the case of the latter, enormously increased levels. It would allow the county debt to be paid down by $80 million and provide a $9 million sum to be used for an "attack on crime" (a category in which Willingham would include a variety of social services for low-income residents).

"I want to be sure these figures are audited and accurate before I put myself on the line," cautioned Kirk, and, indeed, there are numerous complications to be vetted before a payroll tax could end up even being voted on. The state legislature would have to authorize Shelby County to impose such a tax, for example.

Though he, too, believes a payroll tax deserves to be looked at carefully and very soon, Thompson makes no secret of his wariness. "First off, it's an income tax in disguise. And I think it's one of those variables which could put the county at a competitive disadvantage in attracting new residents and new industry." It also could prompt various businesses to relocate in nearly out-of-state suburban areas or at least to diversify their operations geographically, Thompson said.

But, one way or another, the issue would seem to be about to hit the front burner sometime very soon.

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