Local Government Tax Increases

The General Assembly is busy trying to raise our taxes. The bill filing deadlines have passed for both the Senate and the House, and there are a slew of local tax increases filed by both Republicans and Democrats alike. The bills that have been filed are local option sales tax and occupancy tax increases.

An occupancy tax is assessed as a percentage tax on hotels or other rental accommodations within the jurisdiction of a local government. Use of the money generated from this tax is typically restricted to tourism promotion unless otherwise specified for a particular project such as beach nourishment or the construction of a convention or performing arts center. The only way a local government may levy or make changes to the tax is through authorization from the General Assembly.

The local sales tax rate is set at 2 percent with an optional quarter-cent tax for additional county revenue or a half-cent tax for public transit. While many local governments claim they will collect the tax for a specific purpose, that is not permissible by law. Any revenue generated from the local-option, quarter-cent sales tax is considered general revenue and can be spent on anything in the county’s budget.

So where are these increases being proposed and who wants to increase our taxes?

Occupancy Taxes

Sales Taxes

Since sales taxes are revenue for the local government’s general fund, I cannot state if these governments need the funds or where they will choose to spend them if approved. The Occupancy tax revenue will more than likely be spent on tourism promotion, which I question is a necessary function of government. At the very least, these tax increases should be put forward in a referendum, not passed by a simple resolution by county commissioners.

Sarah Curry

Sarah Curry is Director of Fiscal Policy Studies at the John Locke Foundation.

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