Selling A Sales Tax To Voters

Jan 8, 2014

A measure before Stephenson County voters this spring could provide more than a million dollars to area school districts. It's a way to raise revenue that hasn't been embraced in all Illinois counties that have attempted to get it on the ballot.

Credit photo credit by Purrow/Flickr (CC BY 2.0)

Boone County Prepares For Boost In Sales Tax Revenue

In the mid-1990s, Boone County saw a population boom and the schools became crowded. As a result, the Belvidere School District built new schools.

"The knowledge at the time was that, as we got farther out, there would be more people moving in, and more people to share the responsibility of paying those bonds," Belvidere Schools Supt. Michael Houselog said.

That didn't happen.

"But then when the enrollment started to drop and the economy started to actually tank in 2009, that hit us hard around 2010," he said.

That's when administrators took a hard look at new ways to bring in more money. A 2007 state law allows county voters to approve as much as a 1 percent sales tax to help pay for facility upgrades. But that effort is not always successful. It passed in Boone County in Spring 2013 on the second try. Whiteside County voters have rejected it three times.

What Can't Be Taxed

The sales tax may not be added for big-ticket items like cars, boats, and mobile homes. It also must be excluded on medication.

There also are limitations to how the money can be used. The sales tax revenue cannot be used for textbooks, buses, computers, or salaries.

Money brought in from the higher sales tax can be used for building projects or to pay off debt. Belvidere's Houselog says that's how the district could afford to decrease the burden on homeowners:

"Our board made a commitment to the $2.5 million approximately that we anticipate getting every year," he said. "We will use 100 percent of that to abate to taxpayers."

Jeremy Groves, an economics professor at Northern Illinois University, takes a different view.

"This line of saying 'we are going to give you property tax relief' is the canned 'this is how we sell a sales tax,' " he said. "The kind of dirty little secret is, more often than not, very little of that sales tax actually shows up in observed property-tax relief."

Groves says it may just be a way to keep property taxes from increasing.

"I am not trying to say that everybody is being evil and scheming behind the scenes but, more often than not, what you observe is that there's really no decrease in the property taxes," he explained.

"You could even make the argument that there could be a long-run increase because, if you are using these sales taxes to build capital or to build something that's going to need long-term maintenance, as those things generate more upkeep and maintenance expenditures, where's that money going to come from? More often than not, it's going to be filtered into the larger budget; and that, then, is going to be paid from property taxes."

But Houselog says he doesn't expect the district will use the money for new buildings in the near future.

Patrick McDermott is Assistant Superintendent of the Freeport School District, where voters will weigh in on the issue this spring. He says future school boards could decide to use the money for building projects, but the current plan is to use it all for property tax relief.

"There really is no other way to effectuate property tax relief within the current laws other than this," McDermott said. "People have asked for the property tax relief, and we actually found a way within the law to make that happen."

Professor Groves says the property tax sell is more politically palatable:

"Property taxes hold the distinction of being one of the most hated taxes. TheĀ  most common reason for that is the fact that it is the most visible. People don't keep track of what they pay in sales taxes because sales tax is just 'that little add-on thing when I go check out at the grocery store,' " he said.

Tax Exporting

Groves says the other advantage of sales tax versus property taxes is an idea known as "tax exporting."

"With a property tax, only the people who live in that county pay that tax. With a sales tax, anyone who travels through that county and purchases something pays that tax. This is also kind of a way to push that tax onto other people," Groves said.

Belvidere Supt. Michael Houselog says the Tollway Oasis in Belvidere in Boone County is a good example.

Stephenson County voters still have time to hear the pros and cons of raising the sales tax. The question appears on the March 18 ballot. In the meantime, school district officials plan to update the public on how exactly the money will be used. Residents may also hear from business owners about how they feel about those "add-ons" at the bottom of the receipt.