14% Sales Tax Hike for Rail More Regressive than Other Sales Taxes and Broader than Claimed. Will Harm Economy.

 

Pinellas Will Have the Highest Sales Tax Rate in State if Voters Approve it in 2014 -for a train from St. Pete to Clearwater. NoTaxforTracks.com
Pinellas Will Have the Highest Sales Tax Rate in State if Voters Approve it in 2014 -for a train from St. Pete to Clearwater. NoTaxforTracks.com

Yesterday, the Sun Beam Times reported that, if passed by voters, Pinellas County will have the highest sales Tax in the state at 8%.  Some readers pointed out that the tax does not apply to items after $5,000.  Thus no more than $100 would go to the county of the total $400 collected from a $5,000 purchase. Thus a correction is in order: Consumers purchasing cars, boats and other high priced items will not pay more than $100 extra for the County based “discretionary” sales tax.  However, this means that those buying higher priced items will be exempt from paying taxes than those buying lower priced items will have to pay at the full rate.  That is the very definition of a “regressive tax” – it effects those at lower income levels more profoundly than those at higher income levels. Taxation is most fair and appropriate when applied equally to all – at the lowest rate possible.

In addition, a review of Florida statutes reveals that there are many things taxed by this local “Discretionary” sales tax that will hurt consumers at low income levels and many businesses.  The highest county sales tax in the state will drive businesses out or keep them from moving here – further hurting jobs and the economy. Here is how.

Electric, Phone Bills and Utilities are taxed – without a $5,000 cap.

Florida Statutes 12.054 (2)(b)2 indicate that the Local “Discretionary” sales tax applies to Utility bills WITHOUT LIMIT.  This means your electric and prepaid phone plans will be facing an 8% sales tax, the highest in the state. Cities apply a variety of “utility bill taxes” on water, sanitation and standard phone and cable TV bills as well. It remains to be seen if the full 8% would apply to these, but given the tax hunger of local governments, it is likely every attempt will be made to tax them fully. Simply look at your utility bills to see what you are paying in local taxes now.

Any major company that seeks to build a plant, or relocate an office complex will have to pay 8% sales tax on the full cost of utility bills.  What company would build a manufacturing plant in Pinellas County when building it in Manatee County will allow them to pay a 6.5% sales tax on their utilities instead of 8%? That could mean the difference of hundreds of thousands of dollars every year.

No $5,000 Cap on “bulk” items – each taxed separately to raise more money

In addition, the State Department of Revenue has determined that bulk items can be separated out for taxation purposes. A January 7, 2013 memo showed that a business must pay the tax on different colors of paint (white, yellow and blue) – the “paint” item can’t be listed on one line together and each large amount must be taxed separately. This will apply to all items – lumber sizes, roofing tiles of different colors purchased in bulk for a large housing development, different types of electrical wire by gauge. In other words, the county will be encouraged to find creative ways to apply the increased sales tax to as much as possible. This will make the cost of building in Pinellas even higher – further effecting development and jobs in negative ways.

No $5,000 cap on Commercial Real Estate Rents

Commercial rents are fully taxed at 8% regardless of amount (http://dor.myflorida.com/dor/forms/2009/gt800019.pdf ).  This will discourage companies from renting commercial spaces in downtown St. Petersburg (recently vacated for instance by “Universal Health Care”) or anywhere else in Pinellas county. That will have bad ripple effects on the taxpayer subsidized and now empty parking garage next to that building. Why should a major corporation move their headquarters to Pinellas County when they will pay a sales higher tax on their commercial rent than in Manatee, Pasco or Hillsborough?  This will also hurt jobs and development in the County.

Service Warranties

Warranties on items purchased outside the county but that apply to items used in the county (e.g. on Cars, computers, phones, electronics and more) will be taxed at 8%.

The claim that light rail will improve commercial development is seriously hampered by the facts that businesses, private development and jobs will be seriously harmed by creating the highest sales tax in the state right here in Pinellas. For a train that goes from St. Pete to Clearwater.

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3 Replies:

  1. tom48212

    Speaking of taxes. Can anyone name one state other than Florida that has a sales tax on commercial rent? Florida goes so far as to charge a sales tax on commercial rent between related parties. Governor Scott looked into this matter this summer and he may try to reduce or eliminate it in this upcoming session. We will have to wait and see.

  2. Ron Thompson

    I disagree that the transit tax is “more regressive”, but will not discuss if it is “broader”. The analysis done is very simplistic. That same level of calculation says FCAT scores measure a child’s learning, and Cholesterol numbers measure a person’s health. It is an indicator, but not a “fact”.

    By rolling back property taxes homeowners far from the city center, those that generally do NOT use transit, should have a basic wash for taxes (more sales, less property) within a small margin. This will depend if they have been benefitting from favoritism for long-term residents. If so, they will still retain their special privilege (over their otherwise equal neighbors), but lose their special treatment for one small part of their overall tax bill (transit). If in the end, they use the more available bus system, they will doubly benefit. For all the scary examples, I rarely buy a new boat or car and spend most of my money on groceries and medicine, all tax-free.

    Where available, mass transit is often needed and used by lower income residents, as well as tourists and visitors. However, low income residents in Pinellas are currently given a devil’s choice by their well-off suburban, car owning, neighbors who oppose enhanced bus routes.

    1. The poor can just buy a car. A cheap rattletrap, of course, prone to breakdown, needing constant repair and unreliable for getting to work. It may have to be bought “no money down” with high interest rates because, unlike distant homeowners, these low income neighbors do not have high paying jobs and long work histories. But they still need to get to work, the doctor, and PTA meetings.

    2. Take the totally inadequate current Mass Transit. As we know, the current system is funded for suburban and highly automobile owning demographics. Busses run infrequently, often every 90 minutes. They run in a spoke and hub pattern, to shopping malls, but at the distant limits of the parking lot (don’t want the riff-raff near our stores). They do not run to places of work. If you need a transfer, you pay again, and you often have to wait 45 to 90 minutes. If you work 2nd shift, too bad. It is practically designed to be impossible to use by low-income, working class citizens, due to the limited hardware and drivers.. Then we all say “the buses are under utilized!”. Thats because they have not reached a critical mass to achieve use.

    3. Limit work options. Sure there are plenty of jobs, you lazy “taker”. But you can only work only within walking distance of the poor neighborhood where you live. At a service station, a cheap motel, cleaning homes where the owner picks you up. And once you lose a job, you might take a bus to the unemployment office (on a major artery), but forget finding a new job you can arrive at without a car. So stay on unemployment, then welfare, and sit around hopeless while your skills erode and your morale tanks. We all complain when the poor take this choice.

    I DEMAND that low income citizens work their way out of poverty, but unless those that vote against transit are ready to drive these neighbors to work every morning, they better have another plan ready. Do you want to pay transit tax, or welfare food stamps and unemployment. Or better yet, high insurance from the natural next step with is civil disturbance, so higher taxes for police overtime and jails. Penny wise and pound foolish. No busses to get to work, but jails because you couldn’t get a job!

    Any sales tax that hits the poor, and tourists, but in exchange provides those same populations positive offsets of equal OR GREATER value is not regressive, and actually not even a tax. Tourists would not need a rental car to get to the beach if regular transit (like Europe, Asia, and everywhere) was available. There would be less parking problems, more green and beach space making Pinellas a more desirable vacation destination. There could be a few more car rental locations at the beach, for those tourists wanting a day trip inland, to relatives, Disney, or the zoo. Hertz, Avis, and the like at the airport might be upset about increased sensible transit, but getting rental cars off the road and out of our daily rush our traffic jams should be considered a POSITIVE outcome, not something to be angry about.

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