Clark County’s sales-tax leakage is akin to a faulty pipe under the house. You might know it’s there, but it can be difficult to pinpoint the location or the size of the leak; therefore, it can be difficult to fix.
Still, there are some tepid conclusions that can be drawn from a recent report by County Finance Director Mark Gassaway.
“The range that I calculated for sales tax leakage, or the loss, has … actually decreased,” Gassaway told the Clark County Council this month. “In the latest analysis, our range of sales tax loss is somewhere between $2.1 (million) to $5.9 million. Two years ago, in the same analysis, it was somewhere between $2.7 (million) and $8.7 million.”
Sales-tax leakage is the amount of government revenue that is missed when Washington residents shop in tax-free Oregon, and concern about the issue is nothing new. As demonstrated by the broad range of Gassaway’s numbers, it can be difficult to quantify. But it makes a difference, even for a county that has approved a $753 million budget for 2023.
Within the Vancouver city limits, sales tax is 8.5 percent of an item’s purchase price. The state rate is 6.5 percent, and municipalities may tack on local surcharges. In a state where income tax is prohibited by the constitution, Washington governments are particularly dependent on sales tax for funding.
Regardless of how one feels about taxes — and about Washington’s quirky tax system — reducing the leak is good for the region. If shoppers are making a higher percentage of their purchases in Clark County, the sales tax benefits county programs and local proprietors and workers, rather than retailers in another state.
That is particularly relevant during the Christmas season. Consumers can cross the Columbia River and shop in Oregon, or they can keep their money close to home.
A decrease in sales-tax leakage reflects increasingly attractive retail options in Clark County. It also reflects the fact that sales tax for online shopping is paid at the location of delivery, and that makes up an increasing percentage of retail purchases.
But shopping is only one factor in sales-tax collections. Clark County misses out on revenue from scofflaws who live in Washington but register their vehicles in Oregon.
The impetus is to avoid Washington tax on vehicle purchases, and to take advantage of Oregon’s lower licensing fees. “We see a lot of people using the bridge who have just come from a Washington residence with their Oregon tags,” Council Chair Karen Bowerman said.
This also is nothing new. The Washington State Patrol has a License Fraud Unit, and the unit’s website includes a form for reporting suspected lawbreakers. The website also notes: “The State of Washington relies on businesses and citizens to voluntarily pay their fair share of taxes to fund state services.”
It is difficult to estimate how many Clark County vehicles are registered in Oregon. And it is difficult to know where to apply the wrench and plumber’s putty to stop the leak. Local governments and the Legislature have sought to address the issue, but you can’t force people to shop in a particular area, nor should you try.
In truth, the answer lies with us, with local residents. We can shop locally and we can register our vehicles in Washington, recognizing that those actions benefit our community and contribute to the collective good.
Nobody likes to pay taxes, but when it comes to law enforcement or roads or other various county services, we get what we pay for.
