Sales tax vote too close too call

MAT-SU — Among the ballot propositions on this month’s borough election, none seems to be generating heat as much as the sales tax.

Borough Assembly Members Cindy Bettine and Pete Houston sponsored the sales tax measure and the full assembly voted to put it on the ballot at a meeting in July. Later, the assembly overrode Mayor Talis Colberg’s veto.

In a nutshell the tax measure does three things:

First, it enacts a borough-wide sales tax of 3 percent. People in unincorporated areas of the borough will pay a flat 3 percent. Shoppers in the cities of Houston, Palmer and Wasilla will pay 5, 6 and 5.5 respectively since those cities also have sales taxes.

Second, it caps property taxes at 7.3 mills, which is a reduction from its current rate of 9.98 mills. A mill is equal to $100 for every $100,000 of assessed value.

Third, it exempts the first $20,000 of a home’s value. That means a $200,000 home would be taxed as a $180,000 home.

Proponents and opponents of the measure agree on those three things. But they disagree on most everything else.

There’s the question of tax savings.

According to a borough-generated list of frequently asked questions, the owner of an average home — one worth $209,000, according to the borough — would save $706 in property taxes if the ordinance passes. The borough says that to cover that $706 in sales taxes a person would have to spend $23,533 on taxable goods and services.

Frank Bettine — no relation to Cindy Bettine — is the treasurer for CPG – Ballot Initiative Group, an offshoot of the Conservative Patriots Group that helped organize the series of Tea Party protests against big government.

Bettine says that he doesn’t think the property tax reduction would save anybody much money. How could it, he asks, if the borough will have to collect extra revenue — he estimates $1 million a year — just to run the program?

“The 7.3 mill rate plus the 20,000 you get off of your home would not make up for the extra you end up paying for the sales tax,” he said.

He said he ran his own calculations and found that a person spending $3,000 on taxable goods and services a month would wind up paying $584 more in taxes.

On the other side is Jesse Tanner, a real estate agent and chair of Citizens for Property Tax Relief, which formed to support the initiative. He thinks the savings will be immediate, noting that the amount of money a person would have to spend to eliminate the property tax savings is extravagant.

“You’d have t spend $24,000 in taxable goods and services to make up that difference,” he said.

Then there’s the question of assessments.

Bettine pointed out that it’s the borough that sets assessed value. So, if the borough says your home is worth more you end up paying more in taxes.

“There’s no limit on how much they can increase your assessed value,” he said.

Tanner said he strongly disagrees, pointing out that state law says a property’s assessment is closely tied to a property’s market value.

“To say that the borough is just going to raise assessments is ridiculous,” he said.

He pointed out that assessments, since they’re tied to the housing market, actually went down this year and likely will next year. Borough Manager John Duffy, when he presented the borough’s budget this year, backed up that view, saying that assessments were down about 5 percent in 2008.

And what about the tax’s effects on local business and the economy?

Bettine fears it will drive merchants away.

“We’ve been out talking to the small businesses,” he said. “A lot of them are just infuriated about this.”

He also said now is not the time to raise sales taxes, given the economy is in the dumps.

But Tanner said that historically, economic recovery has come from a rebound in the housing market. If property taxes stay high, fewer people buy homes and the housing market stays in the tank.

As for who benefits, Bettine said he thinks the ordinance mainly benefits the wealthy and hurts the middle class.

“What it looks like to us, when we run the money, is that it’s land developers or people who own multiple properties that are going to benefit,” he said. “Mostly middle income home owners that are going to wind up paying a higher overall tax.”

Tanner disagrees, falling back on the estimates of how much the average homeowner would have to spend to erase his property tax savings.

And what about the chances each side has?

“We feel pretty optimistic,” that the ordinance will pass, Tanner said.

“Our feeling from talking to folks is we think it will get defeated,” Bettine said.

Contact Andrew Wellner at andrew.wellner@frontiersman.com or 352-2270.