Sales tax could end red ink

Manuel sees change as way to ease cuts

CHARLES TOWN – A bill poised to pass out of the state Legislature that allows cities to impose a 1 percent sales tax could be the saving grace for Jefferson County’s troubled finances, says Commissioner Dale Manuel.

[cleeng_content id="508865818" description="Read it now!" price="0.49" t="article"]Senate Bill 487, which passed the Senate unanimously on Feb. 21, only explicitly enables cities, not counties, to enact a sales tax. But Manuel says the new law will interact with an older piece of legislation to make it possible for Jefferson County – but no other county – to implement a sales tax. This is because Jefferson County is alone among the state’s 55 counties in implementing the 1990 Local Powers Act, which enabled the county to collect impact fees, among other abilities.

Manuel, who sponsored the Local Powers Act when he served as a delegate, said the law allows counties to enact any tax that cities are capable of enacting, though there is a more involved approval process. So when the Legislature enables cities to collect a sales tax, it will allow Jefferson County to do so as well.

“If the other five municipalities institute the 1 percent sales tax, then it would be uniform throughout the county,” Manuel said. “It would be an important revenue source for Jefferson County if it is adopted by the Legislature.”

The law prevents the county from double taxing by collecting a sales tax in municipalities that have instituted their own.

The county would have to wait until 60 days after cities are allowed to institute a sales tax before the Commission would have the power to levy such a tax in the county. Citizens opposed to a sales tax increase would have 45 days to get 15 percent of county voters to sign a petition opposing the tax. If they were successful, the fate of the tax would be decided in a voter referendum.

Commissioner Jane Tabb said she doesn’t want to see the county implementing a new tax. She said the budget ought to be brought into line through spending cuts.

“We need to work on the budget and make it doable with the tax revenue and the declining gambling revenues that we do have,” she said. “It’s just another tax, and I think we have to do a better job with balancing our budget.”

Also, said Tabb, new revenue sources are on the horizon.

“There is the ambulance fee that we haven’t yet begun collecting, and there is also the possibility of a fire fee,” she said. “I would rather explore that before going to the sales tax.”

Commissioner Walt Pellish said he did not have an opinion on the proposal, saying he was preoccupied with “bigger fish” like the county’s budget crisis.

Commissioner Lyn Widmyer said she had not made up her mind on the tax, but said it should be examined seriously. “I’m not going to shut the door on any idea that might raise revenue,” she said.

Commissioner Patsy Noland agreed that the tax should be looked at.

“It’s something, certainly, the Commission will have to consider in light of the declining revenue that we’ve depended on for so long from table games,” she said. “It may be something that is necessary. I’m hoping that it isn’t.”

Manuel said failing to find new revenue would have serious repercussions for county residents. “Every dollar we get of new revenue would be a dollar we don’t have to cut out of the services that we provide,” he said, noting that the county is examining cuts to emergency services funding.

The county has already cut all charitable donations, including programs serving low -income residents like Jefferson County Community Ministries, which operates a food bank, and the Eastern Panhandle Free Clinic, which offers free medical services. “That was a difficult situation for some of those entities that had been anticipating that money,” he said.

Manuel said a sales tax would have several specific benefits for the county, including providing a steady stream of revenue throughout the year.

“It would be consistent, not seasonal,” he said. “The property tax is somewhat seasonal. It is a little bit more inconsistent than the revenue from a 1 percent sales tax [would be.]”

The county currently has to save a good portion of its budget to get it through a dry spell between property tax collection times.

Manuel said the new revenue stream would also help to fill the hole in the budget left by declining business at Hollywood Casino, a trend that operator Penn National Gaming last month told analysts they expect to continue as more competition comes online in Maryland.

“We anticipate an even greater drop in that revenue,” Manuel said. “As it continues to drop with the advent of additional competition, it makes [a sales tax] more imperative.”

Sales taxes are sometimes criticized for being regressive, meaning that they fall more heavily on lower-income families than on higher-income families, since those with lower incomes spend more of their income on retail items while those with higher incomes tend to save more.

Manuel said this problem would be minimal with the proposed sales tax since it would not be levied on food and would be small. “I think it would be something that the consumer could live with, especially since it is not on food,” he said.

Implementation in the county would also differ from implementation in municipalities, since the law dictates that cities that levy sales taxes must cut their business and occupancy, or B&O, taxes. Jefferson County has the ability to levy B&O taxes under the Local Powers Act, but has so far declined to do so.

Sen. Herb Snyder, who is the lead sponsor of SB487, said the bill’s aim is to improve the business climate by allowing cities to jettison B&O taxes, following the example of cities that had participated in the state’s home rule pilot project.

“Wheeling had great success with trading some of its B&O taxes for a sales tax,” Snyder said.

B&O taxes are levied on the total amount of revenue a business receives – regardless of the costs it incurs. This means that even if a business is losing money it still owes taxes on its revenue, which Snyder says, is harmful.

“This is a pro-business bill, clearly, and it’s a pro-cities bill,” he said.

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