Sunday, August 28, 2005

Sales v. property taxes

This is becoming an increasingly familiar debate across the country. In Georgia, according to the Atlanta Journal Constitution, the proposed change to school funindg would be a reduction of property taxes by 2/3 with a 3 cent (or 75 per cent) increase on sales taxes. Texas had a similar, though less extreme, proposal on the table this year. It failed. Apparently, a dozen or so other states are also considering the tax shift.

The problems are apparent. It would shift the tax burden from upper-middle and upper class taxpayers to lower-middle and lower class ones. And for schools, it would shift the system from a reliable, consistent funding stream to a wildly fluctuating one. From the article:

School officials fear basing funding on sales tax collections, which can fluctuate with the economy. Officials in several districts, including Gwinnett, have seen shortfalls in special sales taxes to build schools. Property taxes, though, are easier to predict and increase annually in fast-growing areas. Other states that rely more on sales taxes, like Alabama, have had problems paying for schools in recent years.

Gwinnett Superintendent J. Alvin Wilbanks opposes funding education solely with a sales tax. "I feel it is not stable enough and could put in jeopardy the local option sales tax that school systems and counties use to fund capital improvements."

Cherokee County Superintendent Frank Petruzielo recently told his school board he feared the sales tax plan would not provide enough money to keep up with the system's needs. And he warned it would put renewal of the special purpose local option sales tax at risk. Cherokee has already postponed building two schools because sales tax revenues are down.

Officials in other districts, including Decatur, Cherokee and Coweta, have also voiced concern about the proposal.

"It's alarming that sales tax would be used for education," said Coweta board member Smith Pass. "Planning would just be impossible."

It'll be interesting to see how this proposal turns out. It would take a 2/3 majority of House and Senate to pass it, followed by a simple majority vote of the general population in November.

Another unintended consequnce for states that do this is that taxpayers can not deduct sales tax, whereas property taxes can be deducted against federal income tax. One economist predicted Georgie would lose over $300 million to federal taxes under the tax shift.

Doesn't matter to the ideologues though. What are facts compared to ideology anyway, right?


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