But these changes in spending habits have big implications for the counties and towns that depend on retail for sales- and income-tax revenue. Many of the areas affected by retail closures have already weathered other departures: factories closing, young people departing for bigger cities, home values dropping. The constant departure of more retail stores is another blow. Some counties in Ohio, for instance, get half of their budget from the sales tax that they levy on top of the state’s 5.75 percent rate, according to Suzanne Dulaney, the executive director of the County Commissioners Association of Ohio.
Nationwide, sales taxes comprise nearly one-third of the taxes that state governments collect and about 12 percent of what local governments collect, according to Lucy Dadayan, a senior researcher at the Nelson A. Rockefeller Institute of Government, a New York-based research group. “The epic closures of the brick-and-mortar stores is troubling news for state and local government sales-tax collections,” she said. They’re already feeling the hit: States’ tax revenues grew just 1.9 percent between 2014 and 2015, after growing 5.8 percent in the previous four quarters, according to the Rockefeller Institute. Local-government sales-tax collections grew just 1.7 percent, after growing 7.5 percent in the previous four quarters. In Ohio, state tax revenues grew just 0.1 percent, when adjusted for inflation, between 2015 and 2016, according to Dadayan. When revenues don’t continue to grow, governments have to slow down spending and can’t readily invest in long-term projects.
“The mall has been slowly shrinking,” Richard Lohnes, a commissioner in Clark County, where the Upper Valley Mall is located, told me. “And losing any retail business has an impact on Clark County—it has hurt.” The county is bracing for more impacts—the Sears at the Upper Valley Mall may soon close, Lohnes said, even as the mall tries to attract new businesses in to fill empty stores.
Clark County is not alone. In the southeastern part of Ohio, near the border with West Virginia, Belmont County gets $17 million of its $22 million budget from sales-tax revenues, Mark Thomas, a county supervisor, told me. The county has lost a bevy of retailers of late, including Elder-Beerman, Hhgregg, MC Sports, and Radio Shack. A Kmart in St. Clairsville is expected to close soon, according to the company. The decline in sales tax isn’t the only thing that hurts revenues—abandoned malls mean less revenue from commercial property taxes too. Local governments also see lower income taxes and, when retail workers are unemployed, they spend less, creating a vicious cycle of less and less revenue. “That trickle-down effect is huge,” Thomas said.
The retail closures are affecting regions that already have their fair share of economic problems. These are places where many factories and businesses have already shut down, and where consumers have less money to spend than they used to. Springfield, where the Upper Valley Mall is located, saw its median incomes shrink more than anywhere else in the country, falling 27 percent between 1994 and 2014, according to the Pew Research Center. Many manufacturing jobs have been automated, and the new jobs that have come in are lower-paying ones in call centers and in retail, according to Springfield’s mayor, Warren Copeland. That hurts the city, which charges its own local income tax. “If retail starts going away, that’s a new hit. That’s a serious threat that we recognize,” he said.