Supporters of San Diego’s proposed one-cent sales tax hike say it would boost revenue enough to fix the city’s crumbling roads and other glaring problems — but the proposal could face a number of challenges at the polls. Those include a daunting history on local measures to increase taxes, questionable timing, voter skepticism about city leadership and criticism that sales tax is fundamentally a volatile revenue stream paid disproportionately by the poor. When a similar sales tax measure was presented to city voters in 2010 during one of the worst economic downturns in history, it was soundly rejected by a margin of 62 percent to 38 percent. Supporters of the new measure, which will appear as Measure E on the Nov. 5 ballot, say they can overcome that history partly because San Diego’s electorate is less conservative and less anti-tax than it was 14 years ago. They also contend city leaders have much clearer and more detailed plans for how to spend the money than they did back in 2010, including comprehensive assessments of sidewalks, roads and decaying buildings. Critics say the measure is poorly timed, coming after the worst inflation in decades and as San Diego’s high cost of living has emerged as one of its biggest challenges. Other critics say voters will be reluctant to give city leaders hundreds of millions more to spend each year in the wake of the debacle of 101 Ash St., a mostly unusable downtown skyscraper city officials bought without properly vetting the deal. But supporters say it would make no sense for voters to reject a measure that could finally fix San Diego’s notorious roads because they are angry about a bad real estate deal or frustrated by inflation and high rents. Measure E, like all sales tax measures, also faces criticism that sales tax is a regressive kind of tax that creates a relatively volatile revenue stream. Compared with property tax or income tax, it generally takes away a bigger share of disposable income from poor residents than rich ones. And sales tax revenue tends to be more volatile than property tax because, in a recession, people curb their spending on consumer goods long before they stop paying their property taxes. That makes cities that rely heavily on sales tax to cover expenses more likely to face deep and painful budget cuts in a recession. Supporters, acknowledging this concern, say San Diego leaders have already discussed sharply increasing the city’s cash reserves — if Measure E passes — to make the city less vulnerable to such volatility. Of all the challenges facing Measure E, supporter Mike Zucchet said the failure of the city’s 2010 sales tax measure is among the least concerning. “It’s night and day,” said Zucchet, the leader of the city’s largest labor union, the Municipal Employees Association. “It was essentially a desperate act where the mayor and council at the time said, ‘We will have to cut millions unless you want to save us.’ I don’t think that’s a message that resonates very well with voters.” Zucchet said Measure E will benefit from how Mayor Todd Gloria and the City Council have focused on the city’s infrastructure problems in recent years. “They have demonstrated that they are really focused on road maintenance and rehabilitation of city assets,” Zucchet said. “This is a multibillion-dollar problem, and it’s not going to be solved by just rearranging a few things here and there.” Inflation is another key challenge, because it’s difficult to ask people to increase the prices of things with a sales tax surcharge when things already cost so much more than they did before the pandemic. Carl Luna, a Mesa College political science professor, said that despite the city’s Democratic shift in the last 14 years, Measure E will face an uphill battle due to recent inflation and the high cost of living. “It might have been better to combine a sales tax increase for everyone with a transit occupancy tax increase on tourists and conventioneers, along with a luxury tax on high-end purchases to show average voters that the ‘pain’ of a necessary tax increase to pay for needed public services and investments is being evenly distributed,” Luna said. Zucchet acknowledged the concerns about inflation. But he said voters will be pleased that all the money from the sales tax hike would stay in San Diego — and none would go to the county, Sacramento or anywhere else. Former San Diego Councilmember Donna Frye thinks Ash Street and other questionable decisions at City Hall are the biggest challenge facing Measure E. “I think they are in for a rough ride,” Frye said. “The public is not particularly trusting right now of this mayor and council to spend their money. The onus is on elected officials to regain that trust, but they can’t do it fast enough for this measure.” To Zucchet, it doesn’t make sense for voters to saddle themselves with crumbling roads to protest the Ash Street deal. “I think that’s something of a distraction,” he said. “All of us can look at any government agency and probably come up with some things they spent money on that we might disagree with.” Another challenge could be the volatility of sales tax. “Sales tax is related to how much is being spent, so during a recession, when the economy shrinks and people spend less money, that revenue goes down quickly,” said Richard Auxier, a principal policy associate at the Urban-Brookings Tax Policy Center. “Even during the Great Recession, which had all sorts of ramifications for property values, property tax revenues didn’t change as much as sales tax revenues,” Auxier said. “The value of the home is affected by the neighborhood that it’s in, the school system and the work that’s been done on the home, so there’s not going to be a huge effect when the economy goes up and down.” But Auxier said cities in California don’t have much choice but to aim to raise sales taxes instead — property tax increases typically require approval from two-thirds of voters, while sales tax increases only need a simple majority. “It may be true that a sales tax increase makes their revenues more volatile, but I would ask what other options the local government has,” he said. “Local governments don’t have income taxes, which are even more volatile than sales taxes.” Zucchet said the volatility has already been discussed among Measure E supporters. “To me the answer is that in the first year, if this passes, the city should rework and rethink how it does budget reserves,” he said. But he also noted that sales tax revenue, which is about 18 percent of the city budget now, would only increase to about 31 percent if Measure E is approved. And he stressed that a recession doesn’t wipe out sales tax. “Even in the worst year ever, only a small percent goes away,” he said. Another possible challenge is the criticism that sales tax is regressive, meaning it falls harder on low-income people than the wealthy. “If you are a lower-income person and you make $20,000 a year, you are spending just about every dollar you earn — you have to,” Auxier said. “Because you are spending a lot, your tax burden as a share of your income is going to be relatively high. But If you’re earning $200,000 or even $2 million, you aren’t coming anywhere close to spending all that money. So the share of your sales tax payments as a share of your income is going to be relatively low,” he explained. But Auxier noted that California has policies to mitigate this, such as child tax credits and the earned income tax credit. “California has benefits that go only to low-income households, and those can offset sales tax payments, so we need to look at it holistically,” he said. When it comes to Measure E, Zucchet said many low-income people will get a bigger return on their investment than wealthy people. “They often live in our older neighborhoods where there are greater infrastructure needs and stormwater needs and streets and sidewalks needs,” he said.