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By Janet Zink June 18, 2010

Brochure estimates financial impact of Hillsborough transit tax

After decades of fits and starts, Hillsborough County commissioners agreed to ask voters to consider a 1 percent sales tax increase for expanded bus service, light rail and road improvements. The issue will appear on the November ballot.

One question many voters want answered: How much will the new tax cost me?

In a brochure outlining how rapid transit can boost the economy and ease traffic congestion, Hillsborough Area Regional Transit says the tax will cost the average family $12 a month.

That figure comes from the Hillsborough County Metropolitan Planning Organization’s long-range transportation plan. It puts the cost of a 1 cent sales tax for the average family at $142 a year, and the average for a single person at $85 a year.

The MPO came up with those numbers by plugging the county’s household incomes into the IRS sales tax deduction calculator, available on the agency’s Web site. The IRS developed the calculator because tax rules allow people to deduct either sales taxes paid annually or state income tax from their federal returns, and the calculator enables them to arrive at a reasonable estimate without having to save a basket of receipts.

MPO planner Beth Alden said she used average household income rather than median income. "The number we’ve been using is the higher one, just to be more conservative," she said.

The county’s average family of three has a household income of $77,852, according to the U.S. Census Bureau. A single household’s average income is $44,832.

We plugged those figures into the IRS calculator and it showed the average family would pay $141.83 a year in local sales tax, which currently is 1 percent. A single person would pay $91.50.
That’s virtually the same as the MPO estimates.

The figure does not include sales taxes on major purchases, such as cars, mobile homes or construction materials for a house. Those are listed separately on tax returns. The county sales tax on items worth more than $5,000 is capped, meaning the maximum amount paid on any single item would be $50.

But how accurate is the IRS calculator?

Skeptical observers say it spits out a low figure.

"It’s in the IRS’ interest to have that on the lower end, obviously, to decrease the deductions," said Rusty Spoor, a tax accountant at Foley & Lardner. He guessed the calculator could be as much as 30 percent off.

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Like other tax experts, he noted it’s impossible to determine exactly how much people pay a year in sales taxes without saving receipts, so the IRS calculator is a useful tool.

"That’s the best of the poorest options," he said. "I don’t think that number’s great, but it’s the best starting point."

The calculator is based on spending patterns captured in the Consumer Expenditure Survey conducted annually by the Bureau of Labor Statistics, IRS spokesperson Florida Mike Dobzinski said.

That’s the best method for calculating how much people pay in sales tax, according to Frank Williams, chief economist for the Florida Department of Revenue’s Office of Tax Research.

"It should be fairly close," he said. "It may understate it by 2 to 5 percent, but that’s just a gut feel."
Opponents of the sales tax say it will cost residents much more than the MPO estimates.

Jim Hosler, a demographer running for Hillsborough County commissioner, initially figured it would cost households nearly $400 a year.

He came up with that number by dividing the estimated revenue from the tax — about $174 million, according to the Florida Legislative Committee on Intergovernmental Relations — by 454,000, the approximate number of households in Hillsborough County.

That comes about $383.

Trouble is, residents aren’t the only ones who pay sales taxes. Tourists, commuters and businesses also pay them. Experts say there’s no way to know exactly who pays what, but most estimate that non-residents bear about 20 percent of the tax burden. Under that calculation, the cost is $307 per household.

But that spreads out sales taxes equally among all households, regardless of income. And a household that earns $200,000 a year will pay much more in sales taxes than a $20,000 household, simply by virtue of having more disposable income.

Hosler concedes his number may be high. "But their number is definitely a low number," he said. "The real number is probably somewhere in between."

Clearly there are a number of ways to calculate the figure, and the result for all of them is a somewhat imprecise.

Still, our research shows that the number in the brochure is very close to the one provided by the MPO, and HART used a recognized, legitimate source in coming up with the figure. The IRS calculation, while perhaps on the low side, is a recognized standard. So we rate the statement Mostly True.

Our Sources

HART Rapid Transit Solutions for Hillsborough County brochure

Hillsborough County Metropolitan Planning Organization 2035 Plan

U.S. Census Bureau, Hillsborough economic characteristics 

Interview with Beth Alden, June 14, 2010

Internal Revenue Service sales tax deduction calculator

Interview with IRS spokesperson Florida Mike Dobzinski, June 14, 2010

Interview with Rusty Spoor, tax attorney with Foley & Lardner, June 15, 2010

Interview with Frank Williams, Florida Department of Revenue, Office of Tax Research

Interview with Jim Hosler, June 14, 2010

Interview with Matt Gardner, Institute on Taxation and Economic Policy in Washington, DC
Florida Legislative Committee on Intergovernmental Relations

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Brochure estimates financial impact of Hillsborough transit tax

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