Revenue collected by the local one percent sales tax in Allegheny County fell by 5.4 percent in February compared to a year earlier. That means overall sales taxes fell by 5.4 percent as well since the same items are taxed at both the normal 6 percent rate and the one percent add on.
Revenue at the Regional Asset District (RAD) was $6.2 million, down $357,000 compared to February of 2012. Since RAD gets half of the one percent revenue that means the County gets one fourth of the $12.4 million total collected and the other municipalities divide the remaining fourth, each of which will see a 5.4 percent drop as well. The state coffers also took a hit of $4 million dollars from Allegheny County sources due to the sales decline here.
What does this mean? Well, certainly it means that taxable sales were off by 5.4 percent, that’s a given. The larger questions are why were sales off and was the sales decline widespread across the region and state? Obviously, a drop in sales tax revenue of 5.4 percent at the state level would be a large number indeed. Continued for any length of time such a series of monthly declines would begin to put the fiscal year collections at risk of not hitting the budgeted amount.
The sales decline could have been weather related; there was a lot of bad winter weather. In that case we should see a rebound in the next month or two. On the other hand, if the sales decline is tied to the re-imposition of the 2 percent contribution requirement for social security, the rise in the top tax rate on personal income, the recent abrupt slowing in employment growth and the likely effects of Obamacare on household and business spending, then the sales slowdown can be expected to continue for a while. An eventuality certain to force even harder decisions by government officials as regards dealing with budget shortfalls. Because not only will sales tax revenue remain below budget projections but so will income tax revenue and other revenues that are lowered when economic activity slows, such as fuel taxes.
Let’s hope the weather explanation is correct. But the jury is still out and the other explanation is certainly plausible.
An opinion piece celebrates the start of RADical days, when the assets funded by the 1 percent sales tax created under the Regional Asset District offers free admission as a "thank you" to taxpayers to show them what the money has paid for. The op-ed closes by noting "RADical Days are the most entertaining way to watch your tax dollars at work."
Much more entertaining that going down to see what happens at the County Courthouse or the City-County building, that is for sure. If the Port Authority gets deemed a regional asset as is envisioned by the recent bailout plan perhaps there will be a day in the future when "free" bus or trolley rides will get patrons to RADical days.
The piece correctly points out that one half of the proceeds from the sales tax goes to fund the assets. The other half is split into two pieces, 25 percent to Allegheny County, the other 25 percent to the municipalities in the County. The legislation creating RAD mandated that upon accepting the money the County and the City had to eliminate their personal property taxes, and the City had to reduce its amusement tax from 10 percent to 5 percent. The City and the County had to create senior citizen tax relief programs and municipalities other than the City and the County were to use the money to reduce local taxes and dedicate a portion to inter-municipal organizations like councils of government.
Do taxpayers know what their local governments are doing with the money? For the County’s 2012 budget the revenue side shows $41.5 million from the sales tax, which amounts to its 25 percent share under the formula. Then, under "other and miscellaneous" there is $17.8 million reported from the Regional Asset District. The latter allocation in its entirety goes to Parks, which has a $22 million budget this year. The $41.5 million goes entirely to non-departmental revenues, a $408 million pot of money. The City budgeted $12.2 million this year as its share and notes that the money "replaces funds lost with the elimination of the personal property tax, the reduction of the amusement tax…and the expansion of the City’s real estate senior relief program".
The RAD website notes that "as a result of new sales tax revenue, 115 municipal governments reduced local millage, 10 eliminated the per capita tax, and three reduced/eliminated the wage tax." It is a strong bet that many of those millage rates have crept back up, and we know that the County and the City have been granted and are often asking for new sources of tax revenue.
Call it a strange case of foreshadowing. When the Regional Asset District (RAD) became law under Act 77 of 1993, only a few people other than Legislators would have noticed the curious fact that the language establishing the District and the accompanying one percent sales tax was appended to an act that amended existing language dealing with investigations conducted by the coroner’s office in Allegheny County.
Stop the reassessment in Allegheny County, no matter what it takes. That has been the consistent mantra from the County Executive (before and after his election) who has asked for the Legislature to enact a moratorium on court-ordered reassessments and has now enlisted the support of several City Council members. This group is backing an effort of a state Senator who wants to allow Allegheny County to end assessments and in so doing end the levying of property taxes by the County, its municipalities, and its school districts.
For those interested in seeing the sources from where the fifty states raise revenue-or at least where they did in 2011-the Census Bureau’s page on "State Government Tax Collections" has a wealth of information. It shows that for last year the states combined collected $757.2 billion in revenue from sales, income, licenses, and other levies.
Close to half of that amount came from sales taxes: $365.9 billion nationally. That amount was split between general sales taxes ($234.4 billion, or 64% of the total) and taxes on specific or selective categories ($131.4 billion, or 36%).
Pennsylvania reported collections of $16.7 billion from sales taxes: $8.9 billion, or 53% came from general sales and $7.8 billion (47%) came from selective sales. Of the eight subcategories of selective sales (alcohol, amusements, insurance premiums, and five others) the Commonwealth reported revenue in each.
Only five states-Alaska, Delaware, Montana, New Hampshire, and Oregon-identified as not levying a general sales tax.
Subsequent blogs will look at state income taxes and where Pennsylvania will fit with the new well assessment fee.
Every so often the idea comes up-shifting the school tax burden from property to something else such as the sales tax or the personal or earned income tax. And as quickly as the idea comes up, it goes away quietly without any real action. This year the House Majority Policy Committee resurrected the notion once again through House Bill 1776 that, according to a recent newspaper account, will be introduced sometime in the near future.
Yesterday’s Brief pointed out how widespread the wage tax is in Pennsylvania and how, among the U.S. states, the local governments in the state account for 60% of all the localities levying a tax on earned income/personal income. The Tax Foundation has released a follow-up on local sales taxes in the U.S. and it is clear PA is not one of the top utilizers of this type of tax.
Only four states-Delaware, Montana, New Hampshire, and Oregon-have neither state nor local taxes on retail sales. Nine other states have only a statewide sales tax. The total combined rate, which adds the state rate and the average local tax rate, does not exceed 10% with Tennessee reporting the highest combined rate at 9.43%.
Pennsylvania has a statewide sales tax, but locally it is utilized in only two places: Philadelphia, where the rate is a combined 8% (6 points for the state and 2 local add-on points which are used for general city purposes and pension funding) and Allegheny County, where the rate is a combined 7% (6 points for the state and 1 local add-on point for the Regional Asset District). There were calls for a countywide sales tax as part of Harrisburg’s Act 47 plan, but that was quickly dismissed. And though the County Commissioners Association has advocated for an add-on sales tax for quite some time that has not come to pass.
Proponents of finding additional funding for the Carnegie Libraries within the City of Pittsburgh’s borders want to place a question on the November ballot asking voters in the City to approve a 0.25 property tax increase.
Will the measure pass if placed in front of the voters? Informal data collected by the state Department of Education’s Office of Commonwealth Libraries shows that about half of the recent library tax questions were approved in recent years. Going back to 2001 the data shows eleven referendum questions posed around the state. Five questions were approved, six were voted down. Two of those approvals came in North Apollo Township (Armstrong County); first a levy was approved and then voters opted to retain the tax four years later.
The proposed property tax millage increase for funding libraries ranged from 0.10 mill in Robinson Township (Allegheny County) to 1.5 mills in Chester City (Delaware County). Two countywide referendum proposals (Perry County in 2002 and Pike County in 2009) were defeated. Two questions in the western suburbs of Allegheny County that both went on the ballot in 2003 went in opposite directions: the aforementioned Robinson approved, Moon Township rejected theirs.
If the question does get on the ballot in the City both proponents and opponents can make their respective cases known. According to the 2009 annual report of the Carnegie Library system, its biggest source of revenue is the Regional Asset District sales tax ($17.6 million) followed by the Commonwealth ($5.9 million). The City of Pittsburgh provided $74,000 that year. Both the RAD and state contribution were up compared to 1998’s financial report, but the City’s contribution was down. So one the one hand there could be an argument that the City needs to give more while on the other hand there could be a case made that there is sufficient public sources invested in the libraries.
The Governor’s Transportation Funding Advisory Commission (TFAC) has a singular purpose as spelled out in the Executive Order creating it: “…develop a comprehensive, strategic proposal for addressing the transportation funding needs of Pennsylvania”.
The real estate tax; the wage tax; the Local Services tax; the realty transfer tax; the parking tax; the poured alcohol tax; the gross receipts tax; the parking tax; the mechanical devices tax; the amusement tax…
You get the idea: there is a plethora of tax sources available to local government in Pennsylvania. That’s why it is always surprising to hear calls for even more sources of tax revenue, particularly when there is a call for layering more taxes upon the existing ones instead of phasing them out.
Just last week the PA League of Cities and Municipalities called for counties to get an additional 1 percent on the sales tax (except in Allegheny County and Philadelphia, which already have local add-ons) for "easing school property taxes (remember Act 1?) and helping county government and municipalities pay their expenses".
Or counties could get a poured alcohol tax like Allegheny County has or, failing those options, the state could just hand out revenue to offset the presence of tax-exempt property (which often generates much of the taxable activity that is captured by one of the many taxes listed above.
Maybe a better option-in light of the massive state budget shortfall, the looming problems with the two statewide pension systems, and the impact of legacy costs at the local level-would be to try and control the spending side of the equation with a spending cap that is tied to inflation and/or population, referenda on tax increases and creation of new tax sources, and a movement to a defined contribution system of pensions for new employees. Otherwise there might not be enough room in the local tax code to list all of those tax sources.