As Rome City Manager John Bennett summed it up, the impact “could be a killer-diller.” The slaughtered victim could be community taxpayers.
Not only that but how bad this could be is of mysterious proportions as private companies view their overhead costs as proprietary secrets so local governments aren’t even sure how much of the entire sales tax comes from this source. Bennett estimates that for the city it is 5 to 25 percent of the total sales-tax receipts … that’s a huge spread.
In any case it amounts to the subtraction of possibly millions of dollars of revenue annually from Greater Rome governments that must either be replaced by the “excise tax” … or something else. Otherwise local services already possibly running on fumes due to the economic downturn take another hit.
A POINT of hilarity: An “excise tax” is not a sales tax but rather a special levy placed on the purchase (i.e., sale) of specific selected items with gasoline, alcoholic beverages and tobacco products being the best-known examples. It’s a sales tax on “certain stuff” … except in Hawaii which has no sales taxes at all instead levying a 4 percent excise tax on everything.
All this could, for local budgets and taxpayers, get very messy and confusing. For one thing, unlike stuff such as the recently defeated TSPLOST, no vote of approval by the electorate is required. For another, if the county says no then Rome could still put one in anyway, and vice versa. Cave Spring, too, although there can’t be much energy used purely for manufacturing there. All this applies only to electricity, gas, oil, coal/water/steam, wood whatever is used to make things … not the same energy if used to heat/cool your home or power your TV/computer.
That tax elimination makes total sense and this newspaper supported erasing this at the state level. It is not logical for government to tax the means of production. Taxing the benefits of what is produced — profits, income, selling the goods — is another debate entirely and about how much, not whether it should be done at all. This was like taxing a carpenter for every time he swung a hammer.
Hence, for local officials looking for guidance on this matter, their philosophical approach should be easy: Refuse to replace one poor idea (the sales tax on energy) with the same bad idea called something else (an excise tax on energy). However, their practical choice is likely to be entirely different.
SALES TAXES, including on energy, are the only thing local governments have to keep property taxes down. Those are their only big sources of revenue, unlike those of the state that grants itself others such as income that it has made impossible for counties/cities to levy. Indeed, the purpose of the local-option sales penny is to keep property taxes down. Same with special-purpose and education special pennies, also to be impacted by this, the purpose of which is to replace bonds (debt) in order to build needed things such as major public buildings and schools using cash in the bank.
If sales revenues are down because of a manufacturing reduction without an “excise tax” replacing it, property taxes have to go up just so local governments can keep treading water without sinking. And such property-tax increases would affect not only households and all business but also the very home bases of the manufacturing operations these gyrations were intended to help make more competitive by lowering their taxes.
It also isn’t going to do the “regional approach” to luring new industry much good, despite general recognition that city/county borders mean little as regards who is employed, etc. Now some counties, perhaps even cities, will try to “low ball” their way to prosperity by swiping their neighbors’ possible new business. Chattooga County has already vowed not to impose the excise tax.
AS THIS space pointed out when the energy tax was erased by the state — and we supported it, remember — “The energy tax elimination ...will be phased out over a five-year period in 20 percent reduction steps. (Any excise tax would be phased in the same way). Implementing it in this manner increases the chances that any savings will be redirected toward and soaked up by steadily rising costs, increased regulatory expenses and so forth.” Now, possibly add to those pressures increased property taxes.
Local governments have been placed between the proverbial devil and the deep blue sea on this by the state and it is deliberate.
The state wants to be “more competitive” (actually just the same as rivals next door that already don’t have an energy tax) because gains made mean revenue from the corporate/worker income taxes it would pick up in which local entities cannot share. It’s a lot like the car purchase changes coming next year where state title fees will go zooming while ad valorem annual taxes on vehicles plunge. The state gets most of those title fees; local governments are now getting the ad valorem taxes. The state vows local jurisdictions won’t be harmed in their bottom lines … wanna bet on that?
To an extent that is now becoming massive, the state is robbing local coffers to try to balance its own budget. It is also reducing past traditional shares for all sorts of community services — education, schools, roads, social services — and leaving the state’s many hometowns and home counties to figure out how to handle the consequences.
IN THIS instance, they will likely wind up adopting the excise tax, allowing it to join such as the estate tax as miserable ideas turned into law. The alternative looks even worse, particularly from a political standpoint. Property-tax increases will irritate all citizens; the taxing of energy — because like tobacco or alcohol manufacturers are addicted to it — will only upset them and not all that much given the comparatively small amounts involved. Besides, as with all taxes on production, that cost is just passed on to whomever buys the product anyway. In other words, the end consumer (you) pays one way or the other.
The real concern for all participants in this community should be that if state leaders seriously intend to continue balancing their own budget on the backs of local government then they must at minimum grant counties and cities the same flexibility in making a wider range of revenue choices.