How much would raising Palm Beach County’s sales tax cost you?

If you’ve been following the debate over whether Palm Beach County should increase the sales tax to 7 percent, you know that the proposal would cost you an extra penny on the dollar.

But how much would it cost you over, say, the course of a year?

The answer is easy if you know how much you spend in a given year on taxable goods and services. Just multiply your expected spending by 0.01.

But most people don’t have a good grasp on that figure. And since people’s spending habits vary widely, it’s not easy to determine the impact on an average household.

But to get a sense of what the annual cost of the hike would be, we’ve assembled three ways to approximate how much the average household would be affected.

The big takeaway: if voters decide to raise the sales tax, the average household would likely pay between $129 and $254 more per year, depending on whose methodology you consider.

To get that range, here are the three methods that we looked at:

Simple Math

MoneyOne way to estimate the impact on households is to take the amount that the sales tax hike is expected to raise and work backwards from there.

If approved on Nov. 8, state officials estimate that the sales tax increase would raise about $2.7 billion over 10 years — money that would go the county’s public schools and municipal governments for construction projects and facility improvements.

How much the average household would contribute to that is difficult to calculate, in part because a large share of it would be paid by businesses and out-of-town visitors.

If county households shouldered the entire load, each of the county’s roughly 530,000 households would pay out an estimated $509 per year on average.

But residents won’t pay the whole thing. Tourists and other out-of-town visitors will pay, too. County officials estimate that they may foot up to a quarter of that bill.

That estimate is disputed — Florida TaxWatch thinks it is too high — but if you accept it, the annual impact per county household drops to $381.

Then we have to account for businesses’ share. Kurt Wenner, vice president of Florida TaxWatch, estimates that businesses typically pay about a third of sales taxes.

After accounting for that, households would be left paying $254 a year on average.

(Keep in mind, though, that business expenses are usually passed on to customers, so much of businesses’ share of the extra sales tax would eventually be paid by residents through higher prices.)

Online Estimators

Image (2) Money%20stacks-thumb.jpg for post 1226Another way is to take advantage of online sales tax estimators, a method suggested by Mike Burke, the Palm Beach County School District’s chief financial officer.

When we asked him for a projection, Burke took two separate online sales tax calculators that give Florida-specific estimates: one operated by the IRS and one operated by SmartAsset.com.

Using each estimator, Burke creates a sales tax projection for a household paying the median county household income: $52,878.

Each site gives a different figure: $111 from the IRS and $147 from SmartAssset.

Burke decided to split the difference between the two. The result is an estimated increase of $129 a year for a household with median earnings.

(One flaw in this method: The online estimators consider Florida as a whole, but Palm Beach County has a higher cost of living than most of the rest of the state, meaning county residents tend to spend more on goods and services than the typical Floridian).

One-third of income

Image (5) dollar-thumb.jpg for post 1175Another method is a more simple one suggested by Florida TaxWatch, a Tallahassee-based non-profit that studies tax policy.

Kurt Wenner, the group’s vice president, said that the average household typically spend about a third of its income on taxable purchases.

For the average county household, that would mean spending $17,608 on taxable goods. If the sales tax is increased, such a household would end up paying an extra $176 a year.

(Note: This method assumes that the household makes all of its taxable purchases within the county, so it may be less precise for families that spend a lot on out-of-county purchases through online vendors.)

One way to weigh the choice

Of course, tax experts the cost itself isn’t the only factor a person should weigh in deciding how to vote.

Richard Hawkins, a professor at the University of West Florida who studies sales taxes, said that voters should weigh the general upsides of how the sales tax would be spent against the costs to them personally.

“The more fundamental question is: Will the county be a better place to live with the new capital spending AND the new levy, or will it not?” he said.

Reader Comments 0

0 comments