Economic Beat Goes On
BY BILL RUBIN, EXECUTIVE DIRECTOR
Headwinds. Icebergs. Torpedoes. Despite the recent gloom-and-doom economic headlines, consumers perched in a mythical crow’s nest say it’s cautiously full speed ahead, especially in Wisconsin’s St. Croix Valley. In reality, those commanding in the ship’s bridge are on heightened alert. The course remains the same – in a forward direction — even with looming obstacles.
Econ 101 reminds us the economic vitality of a region, state, or country largely depends on the spending habits of its residents. Consumer spending is an important metric because it directly impacts the measure of gross domestic product (GDP). The U.S. economy transitioned to a service-driven one long ago. At least two-thirds of consumer spending is on services. One armchair economist put it in understandable terms, “We’ve become a country of haircuts and hot dog stands.”
More Econ 101: Disposable income drives consumer spending. It’s the money potential consumers have after deducting taxes and other withholdings from paychecks. Without sufficient disposable income, no one has the funds to buy the things they need.
Nearly every household experienced serious belt tightening of late. Doubters can check on the meteoric rise of gas, food, shelter, and vehicles – new or used — up, up, and up. Wages and benefits could not simply keep pace. As fast as gas prices rose, they are parachuting downward ever so slowly. Belts were tightened. They still are, and a reoccurring topic around dinner tables likely centers on Wants versus Needs.
Even with headwinds, one measure of vitality bodes well for the St. Croix Valley. The measure is sales tax collections. Almost all Wisconsin counties opted into an extra half-cent sales tax to go along with the state’s five cent tax. A one dollar purchase of a taxable item means the bill is $1.055. On ten dollars, it’s an extra fifty-five cents. You get the picture. St. Croix County enacted its half-cent collection in April 1987. Millions have been collected and wisely expended. Rather than borrow and incur an interest charge, St. Croix County applies much of its sales tax revenue toward capital improvement projects.
Not too many years ago, a strong collection year for St. Croix was $5.5 million. Then $7.25 million. Then $9.75 million. In 2021, the county pushed through the $10 million ceiling with $10.8 million collected. A couple factors helped contribute to a county’s collection fortunes – federal stimulus money to consumers and a 2018 Supreme Court ruling requiring online retailers to collect sales taxes on electronic purchases. Cha-Ching. Five of St. Croix’s top collection months have occurred in the last 13 months, ranging from the highest of $1.13 million in June 2022 to $1.031 million in July 2022.
Weird science or armchair economist? Wants v. Needs? Smoke or Mirrors? Serendipity? Maybe it’s a little of each. Consumers will continue to spend because that’s what they do. There are big shopping days ahead, including back to school, Black Friday, Small Business Saturday, and Cyber Monday.
Icebergs or tightened belts, here’s to determined consumers in the St. Croix Valley.