Mesa = a Crazy City

The Problem with Sales Tax
Source: http://www.andrewalexanderprice.blog.com
Mesa is one of those crazy cities where cities are mainly funded through sales tax.
This is a dumb system.
http://www.mesaaz.gov/city-hall/office-of-management-budget

The problem with relying on sales tax is that everything other than retail becomes a burden. Shops generate revenue for the city, while houses, businesses, and factories that do not make any direct sales do not generate any direct tax revenue - yet consume infrastructure and services.
In an optimal sales tax based city, where the city government does everything to eliminate all burdens and only contains productive development, we will have a city that is purely retail - where everyone lives out of town and comes in to shop.
Here is what the optimal sales tax based city might look like;
The problem with relying on sales tax is that everything other than retail becomes a burden. Shops generate revenue for the city, while houses, businesses, and factories that do not make any direct sales do not generate any direct tax revenue - yet consume infrastructure and services.
In an optimal sales tax based city, where the city government does everything to eliminate all burdens and only contains productive development, we will have a city that is purely retail - where everyone lives out of town and comes in to shop.
Here is what the optimal sales tax based city might look like;
This is a little extreme, instead we can imagine a less harsh example - a sales tax based city where the city council wants residents to live there, but is fiscally responsible by only allowing revenue-generating development.
...and other mixed use developments, as long as they incorporate retail somehow, so that the development can generate tax revenue for the city.

City Manager Chris Brady

Other than form, the problem with sales tax based cities is that building more retail does not automatically mean more tax revenue. There are only so many toothbrushes, televisions, and cars a person will want to buy in a year. A new store opening up will not always mean we will buy more toothbrushes, televisions, or cars.
If a city invests downtown and that attracts more shoppers downtown, tax revenue won't necessarily increase as people are not necessarily spending more - they are just spending their money downtown instead of in the suburbs.
Building a new restaurant does not mean I will eat out more, only that I will have more choices of where to eat when I decide to eat out.
There is also the threat of online retail where people can bypass paying sales tax completely. Wealthier residents that travel frequently may do most of their spending out of state, or even in a foreign country. The city has access to none of this.
However, the largest problem with sales tax based cities is that they have no way of capturing or measuring the performance of their investments. Building a neighborhood park or cleaning up a residential street will not lead to people spending more. We end up with a delusion that cities are like charities - to provide services and infrastructure for the people no matter the cost, because there's no way to capture or measure it.
Basing cities around sales tax is a dumb system that we need to change.