Decreased sales tax revenue accounts for almost half of DeKalb’s deficit.

Rudy Espiritu, DeKalb assistant city manager, listed sales tax as accounting for $225,000 under the projected budget as one of the main reasons for DeKalb’s deficit reported in a Jan. 29 Northern Star article.

“When home sales are down and the government is talking about a recession, people tend to hold onto their dollars more and slow down their spending,” Espiritu said.

Forty percent of DeKalb’s revenue comes from sales tax, Espiritu said. When there is a downturn in the economy, sales tax is very much impacted and city revenues are greatly affected.

Jeremy Groves, assistant professor of economics, said decreased revenue from sales tax is also a problem on a wider scale.

“It’s the same problem as the U.S. economy is having right now,” Groves said. “People aren’t spending enough or buying things.”

The things that people are going to cut back on are luxury items, not necessities, which are taxed at lower rates or exempt, Groves said.

“This is because people are uncertain of their future incomes, and if they aren’t buying what is being taxed, the revenue has to fall,” Groves said.

DeKalb is working on a variety of options to help increase the sales tax revenue. One of the options that the city is considering is increasing the sales tax, Espiritu said.

The sales tax currently stands at 7.5 percent in DeKalb. It has remained at this rate since 2004. Previously, it was 7 percent.

Groves said people must buy more expensive items to make up for the lack of sales tax revenue.

“You must get people to consume things at higher rates or the option is taxing the necessities at a higher rate and that’s what shifts more of the burden to low-income families,” Groves said.

Recently, members of the American Federation of State, County, and Municipal Employees (A.F.S.C.M.E.) have been supporting their fellow municipal workers, who may face layoffs.

“The city and A.F.S.C.M.E. have been meeting to discuss alternatives that we can come up with together,” Espiritu said.

Espiritu said one thing that citizens could do to help with revenues from the sales tax decrease is to “continue to shop in DeKalb and support our local economy.”