Local Option Sales and Use Taxes: Where Does Your Money Go?
By: Sen. Bill Heath (R-Bremen)
Georgians pay billions in taxes each year, but where does all your hard-earned money go?
The majority of state revenues come from income and sales taxes, while cities and counties receive the majority of their local revenues from property and sales taxes. School systems enjoy the benefit of revenue from both federal and state government as well as property and sales taxes. As a general rule, local sales taxes are levied on all items the state collects sales taxes on in addition to groceries, which are exempt from state sales tax.
Let’s specifically explore how local option sales and use taxes affect your wallet. Unlike traditional revenue sources, the local option sales and use tax must be approved by a voter referendum. If approved by a county’s voters, these taxes will impose an additional one percent sales tax to fund locally-approved projects. While often referred to as only a penny, every penny adds up. Now, let’s take a closer look at four of the different types of local option sales and use taxes: SPLOST, TSPLOST, LOST, and ELOST.
A Special Purpose Local Option Sales Tax (SPLOST) is a voter-approved one percent sales tax that provides counties the option to decide what projects in their district need the most funding. The revenues derived for SPLOST funds may be used to finance specified capital outlay projects such as land acquisition, the building of new roads or bridges and infrastructure improvements. These funds may also be used to retire general obligation debt, but cannot be used to pay off existing general revenue bonds.
In order for a SPLOST to be placed on the ballot for voter approval, the purpose of the tax, the amount of revenue it will raise and the tax expiration date must be clearly outlined. These measures were put in place by the Georgia General Assembly to protect against the misappropriation of taxpayer funds. On average, a SPLOST will expire every five years. This allows counties to decide whether additional funding is necessary and prevents projects from going beyond their due date. The SPLOST is collected on every item that falls within the category of the state sales and use tax, which includes the sale of motor fuels and food and beverages. Sometimes the capital outlay projects funded through SPLOST lead to ongoing costs that cannot be funded, such as operating and maintenance costs. To maintain these projects, we may be required to dip into a county or city’s general fund, which would result in added costs to taxpayers. This is certainly something we don’t want to turn into a habit, as it ultimately leads to higher property taxes.
During the 2012 Session, I sponsored a bill that would allow counties to collect a fractional SPLOST. Fractional SPLOSTs allow counties or cities to propose fractions of a percent of sales tax to fund a shorter list of projects. This helps protect taxpayers from scenarios where the list of projects is designed to have “something for everyone.” Another option would be to propose SPLOSTs with shorter lists of projects for shorter periods of time. While I was able to get my bill passed in the Senate, the House never took the bill up after receiving opposition from the counties and cities. Would you prefer to give approval to single projects rather than a whole list of projects?
County schools may propose capital improvement programs through an Educational Local Option Sales Tax (ELOST). ELOST funds must be used for educational purposes or to assist in retiring the school system’s existing general obligation debt. If a surplus of ELOST funds exists, proceeds must be used to retire remaining school-system debt obligations.
The Local Optional Sales Tax (LOST) assists in replacing revenue shortfalls for the property tax. Specifically, these revenues go toward reducing the millage rate, which will be reflected in your property tax bill. While the property tax bills reflect the amount of reductions due to the LOST, almost always the LOST leads to an overall increased level of spending.
Sales taxes help alleviate the onerous burden on property owners and homeowners who pay ad valorem taxes to support government and school capital projects. Those paying sales tax on purchases is a much broader base than those who own property within a single taxing jurisdiction. While most agree that sales taxes are a fairer way to collect taxes, once a sales tax is levied it is seldom repealed. Local governing bodies often claim that if not renewed, property taxes will have to be raised to support the same level of spending.
In total, counties may seek voter approval to levy taxes of up to three percent – or three cents on every dollar. To break it down by county, let’s take a closer look at millage rates across the 31st Senate District. Using 2012 SPLOST collection data, Haralson collected $3,934,213.67 or the equivalent of 9.337 mils. Polk collected $5,379,691.17 or the equivalent of 11.075 mills. And lastly, Paulding collected $16,011,343.73, the equivalent of 6.678 mills.