TAMPA — The highest sales tax in Florida definitely isn’t the stuff of marketing slogans.
But that dubious distinction will belong to Hillsborough County if voters on Nov. 6 approve two proposed sales taxes.
The one-penny transportation tax and a half-penny tax for schools would increase the county’s sales tax from 7 to 8.5 percent and see Hillsborough surpass Liberty County’s state-high eight pennies on the dollar.
And Hillsborough would stay the highest even if nine other counties approve proposed sales tax hikes this year.
Still, some economists and tax experts say Florida, which has no state income tax, remains one of the least taxed states in the nation and that the new levies would do little to dampen Hillsborough’s economy or deter people or businesses from moving here.
One reason: Local sales taxes apply only to the first $5,000 of any major purchase. That means when buying a new boat or car, the new taxes would add only $75.
That isn’t enough to convince most shoppers to drive to neighboring counties unless they live right on the border, said Shaun McClung, tax managing director with accounting and tax firm CBIZ MHM. The levy is 7 percent in neighboring Pinellas, Manatee, Polk and Pasco counties.
"Optically, and maybe emotionally, having the highest sales tax in the state or of the surrounding region would seem detrimental,’’ McClung said. "But financially, the impact doesn’t seem like it would be action-altering."
And being the highest in Florida would still leave Hillsborough well short of being the highest in the nation. Chicago’s rate is 10.25 percent, Birmingham, Ala., is at 10 percent, and Seattle is at 9.5 percent, according to the Tax Foundation, a nonprofit independent policy group.
"When we look at what is the average sales tax across the United States, it is in excess of 8.5 (percent)," said Diane Yetter, founder and president of the Sales Tax Institute, a consulting and education firm. "Given tax rates in Florida are historically lower and with a local tax cap, it shouldn’t be as bad."
But it is more tax.
Although it doesn’t apply to mortgage, rent or most basic groceries, sales tax is added onto the cost of many items, like soda, that typically make their way into grocery carts.
Heated food and meals at restaurants also are taxed. For example, the tax on a $50 meal at a restaurant would rise from $3.50 to $4.25, and there would be an extra six cents tagged onto a $4 cup of joe.
If both ballot measures pass, a household with Hillsborough’s median income of around $55,000 would pay an extra $183 per year in taxes, based on an IRS sales tax calculator.
Out-of-county commuters, visitors and tourists would also pay the tax, as would businesses on most items they purchase, except for those they later sell to customers.
Two tax increases at once would result in an unusually high jump in the tax rate, said Scott Peterson, vice president of U.S. tax policy and government relations for Avalara, a firm that develops tax software.
"When you spread that across a weekly paycheck, that’s not a lot of money," he said. "It’s more likely to change spending than change savings."
The impact on low-income families was one of the concerns recently cited by the president of the Hillsborough chapter of the NAACP. Sales taxes are considered regressive because low-income households typically spend a greater proportion of their incomes than more affluent peers who tend to save and invest more, said Luke Watson, an assistant professor at the Warrington College of Business at the University of Florida.
"The sales tax burdens low-income earners harder than high-income earners even though high-income earners still tend to pay more absolute dollars of tax," Watson said.
All for Transportation says the penny tax is the only way to pay for needed road and transit infrastructure. The 30-year tax would raise about $8 billion over its first two decades.
"The cost of doing nothing is already far greater to everyone in the community — the cost of losing a job because it’s inaccessible via public transportation, or the cost of another realignment because of potholes that aren’t fixed," said chairman Tyler Hudson.
That is disputed by Notaxfortracks.com, a group campaigning against the transportation levy but not the half penny for schools. "Funding for pricey trains to downtown stadiums takes an additional tax that residents of Hillsborough County can’t afford," said Karen Jaroch, the group’s chairwoman.
Gas taxes, a major source of road funding, have slumped by $10 billion over the past two decades, according to Federal Highway Administration figures.
For Hillsborough County, gas tax revenue has fallen from almost $69 million in 2004 to $54.1 million in 2018 when adjusted for inflation.
That isn’t a surprise to Todd Thompson, the owner of the Tampa Hybrid car dealership on U.S. 41 in Lutz. The shiny new electric and hybrid cars that line his lot use no or little gas compared to regular cars.
Some states charge a premium on electric cars to make up for the gas tax shortfall. Florida does not, he said.
"As more and more electric cars are on the road, there is a lot less gas tax collected," he said. "The money has to come from somewhere to fix these things."
Todd’s dealership is about a mile from the border with Pasco, where the sales tax could be 1.5 percent cheaper come Jan. 1.
He isn’t worried.
If the taxes pass, there may be a rush of people making purchases before the taxes go into effect, he said. After that, he doesn’t expect people will drive farther for such a small gain.
Anyway, the tax rate on car purchases is based on where the car will be registered, not the county where it was purchased, he said. "I don’t think it will have any impact on the economy," he said. "People buy a car because they need it. I don’t think $75 will make a difference one way or another."
A 2017 study by the Kellogg School of Management at Northwestern University agreed, showing that some households stock up on goods prior to a sales tax increase. That may mean lower sales in the tax’s first months, but after that, spending returns to normal levels.
A good school system, robust transportation and business incentives are often cited as critical when it comes to attracting new businesses and residents. Surveys have shown those sway people more than the local tax rate, said Peterson, the Avalara vice president.
The business community in Hillsborough has not shown much concern about potentially having the highest sale tax rate in the state. The transportation plan has been backed by most chambers of commerce, local hospitals, the area’s three major sports franchises and several development firms.
Another backer is the Tampa Hillsborough Economic Development Corporation, the county’s corporate recruitment agency.
"While the passing of these two referendums will mean an increased sales tax on some consumer goods ... they propose real solutions to two very big issues plaguing our community," said Craig Richard, the corporation’s president and CEO.
Contact Christopher O’Donnell at [email protected] or (813) 226-3446. Follow @codonnell_Times.