Supporters of 1 cent sales tax increase say it will relieve property owners; Plenty of critics say tax payers are already tapped out
EDWARDSVILLE — Madison County voters will have to decide on April 4 whether or not to increase the sales tax by 1% to help county schools with capital improvement projects.
Proponents of the County School Facilities Sales Tax (CSFT) consider it as an alternative revenue source shifting away from prior reliance on property taxes for local school district funding.
Triad School District superintendent Leigh Lewis said that the increase would generate approximately $23 million, distributed to districts based on student population. With the county’s student population being roughly 40,000 — Edwardsville, with its 7,500 student population, stands the most to gain, earning a $4.2 million cut of the revenue. Smaller districts like Venice, with a student population of 88, will only receive $50,011.
Lewis noted that in the era of the state’s ongoing budget problems and their failure to fulfill financial obligations to downstate school districts, this sort of revenue stream makes sense due to outside visitors shopping in the county contributing to roughly 30% to 40% of the overall total. Lewis also noted another benefit is the extra revenue can be used to pay down construction bonds which led to property tax increases in the first place and that they can save on what is currently spent on high-interest payments.
School boards were allowed the ability to place tax hikes on the ballot through a law passed in 2007 and since that passage, 47 counties in the state have passed CSFTs with several counties with a similar referendum on the ballot for the April 4 consolidated election. Eight counties put the measure on the ballot in the November 2016 general election and all measures passed, according to a fact sheet provided by the proponent promoting the sales tax increase, 1 Cent Makes Sense – eight counties put sales tax measures on the ballot in November 2016 and all passed.
This particular measure made it on the April 4 ballot, thanks to ten school districts in the county voting in support of putting the measure on the ballot, exceeding a minimum threshold of at least 51% support from representation of the county’s student population. Collinsville CUSD #10 voted against it, with Edwardsville and Venice “silent” or abstaining without voting. 63.5% of the student population districts voted to put it on the ballot.
While supporters claim that outside consumers can “help” lower property tax rates and help fund our schools, criticism from opponents is of no shortage. Jared Labell, executive director of Taxpayers United of America (TUA), said the sales tax referendum in Madison County is typical of others he’s seen statewide where proponents can rather easily explain what their capital and infrastructure improvement needs are. Labell said the problem lies in school official refusing to look at cutting “exorbitant” and excessive pensions and salaries that are “way out of tune.” “It’s always, let’s figure out how you can raise another tax,” Labell said.
Labell called the argument made by proponents that the sales tax will largely be picked up by community visitors a ploy to con the voters into believing the lie that it will left the burden on property owners. “It sounds good to voters who are already inclined to help with schools’ needs that ‘other people’ will pay the tax,” he said. “But that’s just not the case.”
He said people will go elsewhere, likely the St. Louis metropolitan area in Missouri, specifically to purchase higher ticketed items and it happens “all the time” in the Chicagoland region, where people will go all the way to Indiana to buy cartons of cigarettes. “Unintended consequences is the name of the game with taxes,” he said. “People of all political spectrums will do what they can to avoid taxes. No one wants to pay them. Many believe in the ends of education – who doesn’t want good things for education or good roads. The means is the question. People will try to avoid (higher) sales taxes.”
TUA is involved in fighting other tax-related initiatives appearing on the April 4 ballot statewide, but hasn’t yet campaigned against the Madison County referendum or two separate referendums in St. Clair County.
State Senator Kyle McCarter (R-Lebanon), arguably one of the most fiscally conservative voice in the Illinois Senate urges votes to vote against the sales tax proposals in both counties and demand a change in how government operates. “Illinois taxing districts are constantly asking the taxpayers for more of their hard earned money to maintain old fashioned out of date inefficient systems of government rather than responding like the private sector in a free market,” he said. “Making government smaller and hence affordable is imperative, even if it is challenging and uncomfortable like consolidating schools and townships. Increasing sales taxes one more percent is wrong and just one more excuse for overweight government to not go on a diet.”
Madison County voters overwhelmingly rejected a 2013 referendum asking for the same one-cent sales tax increase 81% to 19%, so it remains to be seen whether voters will have an appetite for this sales tax increase.
Leading to the 2013 referendum, contributions were made back in 2011 in the amount of $42,660 to the Citizens for Property Tax Relief committee, most of which came from construction contractors, labor unions, architects and other entities benefiting from school capital improvement projects. St. Louis-based financial services and investment banking company Stifel Nicolaus made $25,000 in in-kind donations. Stifel Nicolaus partially handles bond sales for municipalities and school districts.
Commentary from the Illinois Policy Institute made back in 2014 cautioned votes living in fourteen counties that year to be aware of “self-interested corporations involved in a sophisticated effort to raise taxes on local residents.” The article, written by Brian Costin, stated that Stifel Nicolaus representatives traveled across the state to “convince local officials to launch pro-tax hike campaigns.” He wrote that after tax increases are passed companies such as Stifel Nicolaus seek to “gain the lucrative contracts to structure and sell school facility bonds to Wall Street.
Ted Dabrowski, vice president at the Illinois Policy Institute, said that in general there is a lot of money to be made through public sector construction projects. He said a bigger issue with raising sales tax when state lawmakers are already considering a $ 7-9 billion income tax increase is that nothing is being coordinated among the various levels of government and taxing districts. “At some point people are going to be tapped out, then they’ll realize the true impact,” he said.