KINGMAN – With the number of bills going before the state geared to limiting the amount of money the county can collect in property taxes, the county began to discuss the possibility of increasing the sales tax at a workshop Monday.
According to Finance Director John Timko, over 30 bills have been introduced during the last three legislative session that more or less have attempted to reduce the county’s collection of property taxes.
The sales tax proposal would create an additional 1/4-cent sales tax, increasing the current sales tax to a 1/2-cent.
“The legislative enthusiasm for cutting property taxes is quite simple,” he said.
“Legislators can tell their constituents that they are ‘working hard’ to cut their taxes while the impact on the state budget is zero. It is the local and county governments who pay the price for state legislators’ campaign rhetoric.”
Property taxes currently make up the largest part of revenue for Mohave County, Timko said, at about 35.2 percent of the overall budget.
Due to the “legislative appetite for cutting” property taxes, Timko said, this was the perfect opportunity to restructure the tax revenue base for the county.
This restructuring, Timko said, would lower the county’s reliance on property taxes without lowering the total revenue collected by the county.
The small increase would generate about $7.9 million and reduce the tax rate from $1.75 to $1.47, Timko said. This would result, he said, in an immediate, ongoing tax reduction of 16 percent in the county portion of the tax bill for all property tax payers.
This alternative would also spread the tax revenue among all visitors and tourists, as well as those who do not own property, taking some of the pressure off of those that do, Timko said. What used to be paid by only those who paid property taxes would be spread out over several thousands of additional people.
According to Timko, the impact would be almost imperceptible to customers, however, it would have a great deal of impact on the county. By lowering the primary property tax rate, the county would reduce the property tax from 35.2 percent of total revenue to 27.5 percent of total revenue. This would shift the county’s revenue reliance away from property taxes.
“The county is in a strong financial condition,” Timko said. “In spite of explosive growth demand for services, our revenue growth has allowed us to keep pace.”
During the last two fiscal years, Timko said the property tax levy has risen from $21,854,000 to $23,978,000. About $1,444,000 of this increase is due to new construction while $680,000 was due to the inflation on the value of property, according to Timko.
“In contrast to the $680,000 in inflationary growth in property taxes, the AHCCCS/ALTCS charges to the county increased $880,000. There have been proposals in the legislature to limit the inflationary growth of real estate taxes to 2 percent per year. There has been no corresponding limit placed on the growth of AHCCCS/ALTCS which grew at a 10.5 percent rate between FY05 and FY06,” Timko said.
Timko referenced 2000, saying that the past is evidence enough that this would not have a negative impact on the economic growth in the county.
In 2000, the county first imposed a 1/4-cent sales tax. Since that time, according to Timko, the average five-year growth rate in property tax levy has been about 29 percent while the average growth in the 1/4-cent sales tax was 38 percent. Given that the economic activity is rising at a rate 130 percent faster than the population, Timko said that the 2000 sales tax has not had a negative impact on the county’s economy.