Because municipalities rely heavily on sales taxes to fund their day-to-day operations, they must compete with neighboring areas to entice retail developers to their municipality. This leads to costly and counterproductive giveaways to sales tax-producing enterprises. In the end, consumers, schools, and workers all lose.
Prior to 1969, local governments were funded largely with property taxes paid by residents in their home municipality. However, beginning with state legislation that allowed local municipalities to levy local sales taxes, many municipalities moved quickly to replace the funding for their day-to-day operations with new and increasing sales taxes. Some municipalities generate enough sales tax revenue that they were able to eliminate their real estate tax altogether.
This shift from reliance on property taxes to sales taxes has led to a mad dash to collect as much sales tax revenue as possible. When we are focused on competing to bring a shopping complex to Brentwood versus Maplewood, we have limited resources to expend on the sort of regional growth that is necessary to compete on the national level.