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For politicians who need to raise revenue without being seen to raise taxes, the local-option sales tax is gaining currency, so to speak — piles of currency.

You, not the government, decide whether to raise your taxes, as with the state transportation bill the Legislature passed last week: You will be asked in 2012 to approve a brand new one-cent sales tax for your region. The payoff for politicians is clear. If you want to pay for vital transportation improvements, fine. Your call. Your penny.

But the government still has a few tricks up its sleeve for raising cash without raising taxes. One you might see in the next year or so is not an increase in the sales tax but an increase in the things on which the sales tax is levied: groceries, haircuts, car repair and other services that are currently exempt. Another back-door tax increase you’re seeing is in government fees. The Legislature raised dozens of them this year; cities and counties are also pursuing a number of fee hikes as they contend with declining revenue.

The sales tax

Sales tax revenue is off in recent years because of the recession, but Georgia has long embraced the tax; Georgia State University studies show that local sales taxes have increased from 18.1 percent of total local taxes in 1985 to 26.8 percent in 2007.

“There doesn’t seem to be an end to efforts to pay for something with a sales tax,” says David Sjoquist, director of the Fiscal Research Center at the Andrew Young School of Policy Studies at Georgia State University and a member of the commission appointed by the Legislature to provide ideas on reforming the state’s tax code. 

Ferrel Guillory, director of the Program on Public Life at the University of North Carolina at Chapel Hill, said politicians in conservative Southern states find the sales tax attractive because it affects everybody, not just one income group, and is relatively stable because “everybody buys things.” The sales tax is less noticeable, too.

“It doesn’t hit you with a big bill like property tax and the income tax does,” Guillory said. “You don’t write a sales tax check.”

If a new sales tax is going to be imposed, local governments will do the heavy lifting.

Consider the regional transportation bill. It divides Georgia into multi-county regions, in which residents will vote whether to tax themselves to fund road and transit improvements.  Sjoquist said he doubts such a transportation tax would pass statewide.

The Legislature also allowed Clayton County an exemption to call a sales tax referendum to pay for C-Tran, its transit system that ran out of money. If it passes, Clayton residents would pay 8 percent in state and local sales taxes — a level matched only by Atlanta, which added a sewer tax last decade.

Other sales tax ideas failed during the last legislative session, but those bills showed people have different ideas about what the tax can be used for.

One would have created a local sales tax to pay for local arts projects. Another would have allowed counties to use educational sales tax revenue to pay for teacher salaries and other operations, not just capital improvements.

Clint Mueller, legislative director for the Association County Commissioners of Georgia, warned that Georgians might reject sales taxes if too many are put on the ballot. That could hurt the chances of the transportation sales tax passing.

“I don’t think they’ll allow a lot of pennies out there to compete with that,” Mueller said.

The sales tax base

Sjoquist, the Georgia State tax expert, predicts that the state tax-reform commission will recommend expanding the sales tax base — the range of goods and services that are taxed.

That idea worries Paul Pittman, who manages the $5 Barber Shop in South DeKalb County. He would have to charge an extra 7 percent — 35 cents — for each head if barbering became taxable.

“If they go up on me I’ve got to go up on the customer,” Pittman said Monday as he worked beside a window looking out on busy Candler Road. “It’s a necessary evil.”

And though nobody has mentioned it yet, professional services might end up in that mix.

Joe Henchman, director of state projects for the Tax Foundation, a nonpartisan tax research group in Washington, said some states considered putting a sales tax on services provided by lawyers, health care providers, computer firms and funeral home operators. But few states actually tax those services.

“The big services that are untaxed are the ones that are politically untouchable — housing, legal, medical,” Henchman said. “Those have lots of lobbyists.”

Guillory said a commission in North Carolina suggested taxing services, with little effect.

“If you think of the sales tax as a transaction tax it gives you a different perspective,” Guillory said. “I think the next frontier in sales tax policy making is services and the array of services that go beyond just hard goods.”

Special legislation coming?

The group appointed by the Legislature, called the Special Council on Tax Reform and Fairness for Georgians, is expected to make recommendations on which sales tax exemptions should be kept and discarded.

The legislation (HB1405) creating the council names these 11 members: four state economists, Gov. Sonny Perdue, the chairperson of the Georgia Chamber of Commerce, the Georgia chairperson of the National Federation of Independent Business and two members each appointed by the lieutenant governor and the House speaker.

The bill also created a special legislative committee to draw up the bill and a special way to handle the bill once it’s written. The council will make recommendations to the  Special Joint Committee on Georgia Revenue Structure, made up of 12 House and Senate members. That committee will draw up a bill and move it straight to the floor, bypassing normal committees. And once the bill reaches the floor, it may not be amended.

Mueller said deciding  what sales tax exemptions to lose or keep will be a battle.

“Special interest groups will fight tooth and nail to keep their exemption,” he said.

Pittman, the barber, knows that more sales tax collections could help the state. But he’s worried that a sales tax on his haircuts would hurt business.

“It tends to run customers off rather than bringing them in,” he said.

Paying the pennies

Here are the 1-cent state and local sales taxes charged in five metro Atlanta counties, plus Atlanta. Everyone pays 4 percent to the state, and local governments may add sales taxes of their own. A LOST is a local-option sales tax, and a SPLOST is a special local-option sales tax, which may be used for specific purposes such as building schools or roads. SPLOSTs may end or be replaced by other SPLOSTs, so these figures may change over time. Bear in mind that each county or city tax  will go up another penny if voters approve the transportation tax in 2012.

Atlanta — 8 percent

4 percent local (the same three taxes as DeKalb or Fulton, plus a 1 percent sewer tax) and 4 percent state

Sales tax on $50 pair of shoes: $4

DeKalb County – 7 percent

3 percent local (education tax, a homestead tax and MARTA) and 4 percent state

Total sales tax on $50 pair of shoes: $3.50

Fulton County – 7 percent

3 percent local (education tax, LOST and MARTA) and 4 percent state

Total sales tax on $50 pair of shoes: $3.50

Clayton County – 7 percent

3 percent local (education tax, SPLOST and LOST) and 4 percent state

Total sales tax on a $50 pair of shoes: $3.50

Cobb County – 6 percent

2 percent local (education tax and SPLOST) and 4 percent state

Total sales tax on $50 pair of shoes: $3

Gwinnett County – 6 percent

2 percent local (education tax and SPLOST) and 4 percent state

Total sales tax on $50 pair of shoes: $3

Source: Georgia Department of Revenue Web site

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