The sales tax base is tied to mining activity with a large percentage of mining equipment sales. Therefore, the entire tax base is relatively volatile and not necessarily tied to the economy as a whole. The formula systematically devalues the property over a five-year period. If there is a significant downturn in the mining industry the property tax base will not be depreciated away entirely for up to five years. During this same period the sales tax base can erode at a much faster rate.
Local governments receive revenues from various sources.
Some sources are relatively stable while the business cycle and growth of the community affect others. The community needs to have sufficient revenues to provide the necessary services while having a mix of revenue sources that will not be too sensitive to any downturn in the local economy. The elastic revenue sources are that sensitive to the business cycle. If the share of revenues coming from elastic sources is rising, this may forebode problems in the event of an economic downturn. A community's tax rates are an indicator of whether the tax base is keeping pace with growth or whether higher rates are needed to finance necessary services for growth.