Chances are, you have cast votes on more than one occasion to tax yourself via sales tax for education. traffic or other local projects. Chances are, you, like many others, felt it was just a penny here and there, and chances are you bought into the notion that others from outside your jurisdiction would also be paying the tax, which is a win-win for all but those outside of your community.
And chances are, you’d be wrong.
States and local communities pass very specific taxes that are designed to come out of the pockets of visitors. Here in the State of Georgia and in Johns Creek we already have very targeted taxes that do just that. Taxes on rental cars and hotel rooms are, by design, meant to hit more non-residents than residents. And if you have traveled to other locations such as Florida, you already know that there is no mercy in grabbing as much in tax dollars from non-residents vacationing out of your wallet and into their tax coffers..
Chances are you liked the idea of a Local Option Sales Tax because the dollars collected stayed local and you were able to see where the dollars went. One of the first things to go up at the start of any project funded by a Local Option Sales Tax is a sign that says “Your Tax Dollars At Work”. A sign that is designed to make you feel good about those tax dollars you are paying at the register.
But there is a darker side to the LOST approach to taxes(and sales taxes in general).
First, you never really know how much you have actually paid in sales tax in any given calendar year. You can estimate it if you have kept great records, but even then, you will only have a general idea, so it will not be precise.
Yet consider all the “optional” sales taxes you pay. In some communities, that can approach 4% of every dollar you spend. That amount adds up.
Fulton County, Georgia is looking at implementing a LOST this fall. If passed, it will extract more than $500 from each two adult household(more if there are more adults which is the trend). This $500 is just from a 0.75% tax per dollar. Yet those same households in Fulton County are also paying another 1.00% for an Educational Special Local Option Sales Tax, another 1% for a LOST, and yet another 1% for MARTA.
Now we are talking large sums of money. We could be paying as much as $2,000.00 annually per household.
Here’s the kicker: If all of this money would be collected via property taxes, it would benefit us directly. In fact, most of the dollars needed for local governments and school were collected via property taxes in our recent past..
But the Federal Government treats property taxes and sales taxes differently. Property taxes are deductible from you gross income. So, based on what your own tax rates are. you are leaving hundreds and hundreds of dollars in the hands of the Federal Government because you cannot claim those taxes.
Why would you want to do that? Why would you choose to pay taxes in a manner that is not tax deductible when in fact you could choose a method that is tax deductible?
Based on the amount of sales tax collected and distributed to the City of Johns Creek in 2015, just from the Educational Special Purpose Local Option Sales Tax and the Local Option Sales Tax, we can estimate that Johns Creek taxpayers lost out on tax deductions of more than $40 million in 2015 alone.
Using the tax rate of 31%, that means that we paid as a community more than $12 million dollars more in Federal taxes alone than we needed to.
We would have also seen lower taxes for the state of Georgia as well.
So why are we willing to shortchange ourselves to such a degree? Why won’t our local governments tax us through property taxes instead? It’s simple. They are afraid they cannot justify the higher taxes, and if they raise the taxes then they will be voted out of office.
Instead, they present it to you. Then you vote for it, and you shortchange yourselves more than $12 million a year.
Is that really a smart thing to do?
This issue becomes even more crucial as we prepare to vote for a Transportation Local Option Sales tax that will add another 0.75% to the price of your purchases over the next five years, and none of that will be tax deductible.
Wouldn’t it be simpler to eliminate all these games and gimmicks? Would it not be better for you if your property taxes reflected the real costs of living in your community without hiding the additional taxes collected by sales taxes?
Most importantly, would it not be best for you and your family for you to get the tax deductions you would be entitled to if the taxes were collected in a manner that benefited not only the local government, but your family as well?