Pass a tax to cut a tax?
That could be the sales pitch for a proposed Penny for Pasco.
County Commissioner Ted Schrader wants his colleagues to consider the idea of reducing property taxes in exchange for the public approving a 1-cent increase in the sales tax.
And so far, his idea is getting a warm reception from other government leaders.
Though the county has been able to reduce the property tax over the past few years without the sales tax hike, Schrader fears those days are coming to an end. The county is about to embark on major capital or building projects and might face more expenses passed on from the state.
"I'm going to do my very best to continue that trend to lower the millage (property tax) rate," Schrader said. "(But) if we don't have another source of revenue we are going to have to increase (property) taxes."
In January, the county, city leaders and school officials gave tentative approval of the idea to ask voters in November 2004 to increase the sales tax from 6 cents to 7 cents. The tax is expected to collect about $31-million annually.
Here's how Schrader's idea could work: The sales tax income can be spent only on capital costs, such as construction of libraries, schools and jails. That would free up property tax money, some of which could be given back to property owners through tax cuts. Other property tax dollars, originally slated for capital or construction costs, could then be used to operate the new parks and buildings as well as pay salaries.
The county, cities and School Board end up with more money in the end with a sales tax hike, even if property taxes are cut.
"Everybody that is receiving a service would be at least contributing something" through a sales tax, Schrader said, including tourists passing through the area.
Bill Bunting, head of the county's Republican Party, is not buying the argument. He agrees that the sales tax in general is more "palatable" than property taxes.
But he thinks the increased property tax base through growth in residents and the impact fees they pay on new houses will be enough to fund the county's needs.
Last month the Republican Party's executive committee came out against an increase in the sales tax, a move Schrader called "premature" because the county, school district and cities have yet to firm up a plan on how to spend the money.
Bunting responded: "I don't see how it's premature when they haven't come up with a solution on what they need the money for."
Contacted separately, Commissioners Ann Hildebrand, Pete Altman and Steve Simon agreed with Schrader that the growth in the property tax base and impact fees would not be enough to cover the county's needs. Impact fees can be spent only on needs created by new growth. The money can't be spent to remedy existing problems.
Plus, property taxes only account for 21.3 percent of the county's income under this year's budget.
"If the tax base goes up a little bit, that doesn't mean that it can cover an increase if all the expenses go up," Simon said.
As for Schrader's idea, Simon said he proposed something similar a few years ago but wants to get input from the county's budget office before deciding to support it. Hildebrand and Altman think it's a good idea.
So does schools Superintendent John Long, who said a drop in property taxes and an increase in the sales tax could be attractive to voters while still putting dollars in school coffers for classrooms.
For instance, the school district stands to gain $14-million a year from the sales tax hike. With a slight drop in property taxes, the school district would lose $2-million to $3-million, he said.
That still puts the schools $11-million ahead, he said.
"It would be something the School Board would certainly consider," Long said.
Also, countering Bunting's argument about growth, Long said that additional property taxes raised in Pasco don't get to stay in Pasco under state law. Instead, they are distributed to poorer counties. But the sales tax money raised by the extra penny would all stay here.
"It's a much better deal for taxpayers if we go that route," Long said.
_ Saundra Amrhein covers Pasco County government. She can be reached in west Pasco at 869-6244, or toll-free at 1-800-333-7505, ext. 6244. Her e-mail address is amrheinsptimes.com.