Emergency Services Surtax by Income Bracket

crossed-fingers-363478__340The sales tax is a regressive tax.  This has been mentioned in Keys media more than once, as a point of concern, in regards to the topic of the Emergency Services Surtax (ESS).  In it’s “white paper“, Monroe County has made some extraordinary claims.

  1.  Locals pay 100% of the property tax.  Most people would agree that is obviously, patently false.  Hotels pay property taxes.  Restaurants who cater mostly to tourists pay property taxes.  Souvenir shops pay property taxes.  And so on.  To pretend otherwise is just silly and blatantly dishonest.
  2. The new sales tax will only cost locals $125 per year.  This is another doozie.  The county stated that they expect to collect $34 million per year from this additional sales tax.  Locals, according to the county, pay an estimated 40% of that.  There are about 32,629 households in the Keys, according to the Census Bureau.  That works out to about $417 per household, not $125.

This post is about #2, pun intended.  The truth converges, bullshit diverges.  That is my favorite saying ever!  To deal with Monroe County government, you need to be very skeptical and ask a lot of questions.  The county will often make some claim, not backed up by anything at all.  No data, no documentation, no nothing.  Even after all these years, the ease with which they lie blows my mind.  It’s downright scary.

In order to drill down into how much in additional sales tax local families really will pay, I scoured the internet for information.  Tax policy is something that people can get very emotional and partisan about.  I want to avoid all that and keep it to a “just the facts” discussion.  Folks in the Keys need to be very sober, fact-based and well-informed about all this because they are being manipulated.  And they need to be able to see through that to the facts.

So of all the resources out there, I chose this one.  It’s simple.  It’s sane.  They tell you who they are and where their numbers came from, and it’s presented very clearly.  You don’t need a PhD to figure out what they’re trying to tell you.  Plus they break it down by state with some nice graphs.  Here’s the page for Florida.

I also extracted this page from the 2015 Local Government Financial Information Handbook.  It details the discretionary sales surtaxes levied by each county.  You’ll notice that Monroe County levies the famous Infrastructure Sales Surtax and the less famous School Capital Outlay Surtax.  That’s a total of 1.5% on top of the state’s 6%.  At a total of 7.5%, Monroe County already has among the highest sales tax rates in the state.  This ESS proposed by Comm. Carruthers will push Monroe County’s sales tax rate to 8.5%, making it the highest in the state.

The last piece of the puzzle is this table from the Census Bureau’s American Fact Finder tool.  This gives a breakdown of the number of households by income bracket.  A couple of things to mention, this is a more recent estimate than the one I used to come up with the total number of households in Monroe County.  That one pegged the number of households at 32,629.  The new one puts the number at 28,065.  So the sales tax impact on local households might even be somewhat higher than my initial estimate of $417 per year.  Way higher than the $125 per year figure that the county staff pulled out of their bottoms.

I combined all this information together into the following table.  The income brackets from the “Who Pays” report don’t line up exactly with the table from the Census Bureau so I just matched them up in a way that seemed logical.  I’m trying to get a feel for what the impact really is.  Anyhow, this is what I came up with.

ESS impact by income bracket

I highlighted two rows I thought were most important.  The first is the additional cost of the ESS per household.  You’ll notice that the increase in contribution from households in the $48,000 to $81,000 bracket is $413 per year.  It’s almost a perfect match to the $417 mentioned earlier.  It varies across income brackets and it’s a lot closer to $400-$500 per year for your typical Keys resident.  It’s nowhere near $125 per year unless you’re in the very lowest income bracket.

The second important thing to notice is the percent of income devoted to paying sales tax for each income group.  Naturally, the lowest income bracket pays the highest percentage and it declines from there.  This additional sales tax, of course, has the most impact percentage-wise on the lower income households.  They will contribute 1.3% more of their income.  That percentage increase declines as incomes rise.  So the highest income bracket I looked at will see a percentage increase of 0.3%

For me, here are the most important conclusions so far:

  1.  The county’s $125 number is completely bogus.  Disregard.  It’s really somewhere between $400 and $500 dollars per year.
  2. The hardest hit groups are the lower income brackets.  Right now Keys governments are throwing resources at these groups in the name of “affordable housing”.  Does it make sense to increase tax pressure on them while at the same time spending millions of dollars to help them afford to live here?

Of course, the all important question is will locals really see a net reduction in taxes because of this new sales tax?  Yes and no.  Here is the county’s estimate of what various areas currently pay for fire service through their property taxes.  This can be found in the infamous “white paper”.

Table from White Paper - Jan 20 agenda

As stated above, a typical household’s contribution to the sales tax will increase by $400 to $500 per year, with low and moderate income households hardest hit as a percentage of income.  So according to the county’s table, the only areas that will actually benefit from this “tax shift” are those areas served by Monroe County – the unincorporated Lower and Middle Keys.  Households in Islamorada, Marathon and Key West will break even at best.

I don’t see how this additional tax could appeal to anyone.  I consider myself a fiscal conservative and this gives me nightmares.  First of all, it is an additional tax.  Theoretically, it’s supposed to offset property taxes.  But what is to stop the county from jacking up property taxes for other things?  This is a back-door tax increase.  Second of all, it encourages increased spending.  The more you spend the more you get.  That’s how the tax is allocated.  It’s a horrible idea.

If you are a liberal concerned with social justice issues, this is also a nightmare.  It is especially burdensome on low and moderate income families.  Besides, is it fair or sensible that an out-of-state property owner pays zero for fire service to protect his own property?  It just doesn’t make sense.

As always, I invite everyone to do their own research and crunch their own numbers.  That’s why I provide links to my data sources.  Unfortunately, with the county government that’s in place right now citizens are never ever going to get accurate figures.  People just have to do their own homework because county officials simply cannot be trusted to provide accurate, truthful information.

I suspect that certain folks will make out quite well under Carruthers’s proposal.  Perhaps, knowing who those people are and what they stand to gain will bring the whole thing into sharper focus.

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2 Responses to Emergency Services Surtax by Income Bracket

  1. Pingback: Fact Checking the “White Paper” | The Real Poop

  2. Pingback: Monroe County – Allergic to Math | The Real Poop

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