Monday, May 11, 2009

Concerning Sales Tax Rates

According to the Georgia Department of Revenue’s County Rate Chart, all but a handful of the state’s 159 counties charge the full 7% sales tax allowed by law. This percentage includes the 4% allocated to the State of Georgia and, for the most part, additional 1% Local Option (LOST), Special Purpose (SPLOST), and Educational (ELOST) taxes charged by the various counties (there are a few different scenarios hither and yon, not to mention the City of Atlanta’s additional 1% tax, but the “LSE” designation is pretty constant across the board).

Locally, according to the DOR’s Historical Rate Chart, we here in Clarke County have been paying LOST continuously since January 1978, SPLOST almost continuously since October 1985 (with the exceptions of October 1986 through March 1988 and April 1992 through March 1995), and ELOST continuously since July 1997 (see page 5 of the PDF).

Though we can do nothing directly about the state’s 4%, as I see it there are several significant problems with the continued reliance of the Unified Government of Athens-Clarke County and the Clarke County School District on the various optional sales taxes.

The first is that, even if capital projects themselves are constructed using only SPLOST or ELOST funds, once built they doubtlessly will require ongoing personnel, maintenance, and operational expenses, all of which come out of the general budget and not out of optional sales taxes. The point is that these capital projects will have an impact on the budget from the point of construction onward, regardless of the nature of the funding for the construction itself.

Also, consider that revenue bonds are routinely issued in addition to the optional sales taxes. For example, the Unified Government issued $200 million in bonds just last year and the CCSD issued $50 million just the year before that. The idea that optional sales taxes will serve to reduce bonded indebtedness is pure fiction (and yes, I know that the CCSD bonds are supposed to be paid off with sales tax, but if the amount collected is insufficient to do so, the balance ostensibly will be applied to property tax - but that is another matter about which I have commented before).

Then there is the problem of taking property off of the tax digest. Clarke County is the smallest in the state by area, vast swaths of which are not on the tax roll by virtue of being own by the Unified Government, the Clarke County School District, the Board of Regents, the State of Georgia, and even the imperial federal government of the United States. To me, increasing the ratio further by purchasing even more land with optional sales tax dollars is an obviously self-defeating proposition; as more property becomes tax-exempt because it is owned by government, more revenue must be derived from the taxable property that remains just to keep the budgets balanced – never mind the revenue needed to increase spending.

Finally, though they are pitched as “temporary,” the reality is that optional sales taxes never go away. On the one hand, government cries paucity at the very thought of discontinuing such taxes. On the other hand, it claims that such levies will keep property tax low (which never seems to work out, does out?). Besides which, the SOP is to start the planning for a continuation of the optional sales tax even before the current one is up and running, much less completed. In my view the referendum process is structured to favor continuation of such taxes. The strategy thus far has been to promise various narrow interest groups that their per projects will be built, thereby securing the support of them all for passage of the tax referendum. And then there has been the practice of holding (or at least trying to hold) such referenda on dates guaranteed to result in a low turnout so as to magnify the influence of those interest groups (though the General Assembly has tightened this one up a bit).

The root of the problem, though, is that the appetite for money never lets up. At City Hall, the Unified Government is constantly pushing for more revenue in the forms of a new regional (or statewide, as the case may be) 1% transportation sales tax and an increase in the local hotel/motel tax from 7% to 8%. Over on Mitchell Bridge Road, the CCSD whines incessantly about “austerity cuts,” even as it takes in tens of millions of dollars from the state year after year. And so it goes.

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Concerned said...

Ideally, SPLOST builds projects that would indeed have been funded directly from property taxes if it had not been passed; it's hard to figure if its good, or bad, in the long view. I'd like to see a "rating" system that looks at the benefits of SPLOST but simultaneously considers ongoing maintenance costs, for example. Such a system would help the voters decide between the good and the bad. SPLOST projects with low or non-existent maintenance costs remain a good deal. In re the property tax in ACC, ACC itself has put out a lot of propaganda about how it's property tax is low relative to other counties. I haven't looked into this, but wonder a lot about it. U.GA., seems to get a lot of freebies on the backs of home owners. In ACC, though, the CCSD, generally, is ignored, even as it spend the lion's share of the revenue. I don't know why this is so. Nice column!

Anonymous said...

The 200 million bond ACC took out is being funded not by sales tax but water and sewer revenue.

james said...

Yes, I know. My point is that one of the arguments traditionally used to drum up support for optional sales taxes is that they obviate the need for bonded indebtedness.

Kelly Girtz said...

Hi James,
I am especially concerned about the ongoing operating expenses that are associated with many capital projects. My goal for the next ACC SPLOST is a slate of projects that is revenue-neutral (such as sidewalks) or revenue-positive (such as energy-efficiency upgrades for public structures).
Best wishes,

james said...


It is kind of odd, given that we come at issues from such widely disparate philosophical positions, but I like a lot of what you have been saying of late (the old bank building being a prime example).