In a wise financial move, the Kenai Peninsula Borough Assembly voted Tuesday to increase the borough sales tax to 3 percent beginning Jan. 1 of next year.
Current estimates suggest the 1-percent increase in the sales tax will generate between $8.3 million and $9 million per year. Those funds will go a long way to restoring balance in the borough’s tax structure, which today relies far too much on property taxes.
Twenty years ago, borough revenue was almost evenly divided with about a third coming from property taxes, a third coming from sales taxes and another third coming from the state in the form of municipal revenue sharing funds.
Today, more than 63 percent of the borough’s revenue comes from property taxpayers. It’s an unfair burden for property owners to shoulder. Increasing the sales tax means the cost of government will be more evenly spread across all users, including visitors. A borough study has shown that at least one-third of all sales taxes collected within the borough each year comes from people who do not live here.
With the increase in sales tax, Borough Mayor John Williams also hopes to reduce property tax rates by 1 mill over the next two years, saving homeowners $100 a year on each $100,000 worth of assessed value.
Those changes would make the revenue streams from property tax and sales tax about equal. And that’s a good thing.
But as the assembly considers changes to the borough’s tax structure, it also should consider doing a full review of borough tax laws with lots of citizen participation. Longtime Homer resident Bruce Turkington recently proposed the borough from a “tax review committee” to look outside the proverbial box and study all the options.
It’s a good idea.
Naming such a committee should not stop the hike in sales tax or the decrease in property tax, but it could provide a solid foundation for other changes.
One change that needs to be made sooner rather than later is eliminating the unlimited property tax exemption seniors now receive. That exemption needs to go not because of the revenue currently not realized, but because the exemption places an unfair burden on other property owners.
Shifts in the tax structure need to be framed in the context of several key questions: How is borough tax money spent? Are there services that citizens want that currently aren’t being provided? Are some services being provided that citizens don’t want? Is the cost of the services provided spread fairly evenly among those who benefit? Is there a better way to do it than the way we’re currently doing it?
Residents of the Kenai Peninsula Borough value their high quality of life. Most are willing to pay their fair share to live here. It’s not unreasonable to think everyone would benefit from a comprehensive conversation on borough taxes, instead of dealing with elements of the tax structure on a piecemeal basis.
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