County sales tax increase: What it means for shoppers, local programs

Supporters say it will save programs, opponents think it will hurt business and shoppers might not notice.

You might spend a few bucks less if you buy your big-ticket item in Montgomery County today. Come tomorrow, a new quarter-percent retail sales tax increase kicks in.

The increase is expected to generate an additional $19.1 million a year to keep certain county programs afloat and expand others.

RELATED: Montgomery County approves sales tax increase

Some people said it will hardly be noticed by county residents. Others said that, if noticed, the extra 0.25 percent probably won’t greatly change shopping, even for those most concerned about the increase.

“I don’t appreciate the fact that it’s happened, and I’m surprised when it went through there wasn’t a little more resistance,” said Donna Reist, 59, of Centerville. “But in all likelihood, it probably won’t change my shopping patterns too much. Unless it was a major, major purchase, I can’t see myself taking the time or making the effort to drive extra to offset the cost of the tax increase.”

Ron Niesley, 66, of Clayton, said he’s “getting tired of the layers and layers of taxes” paid by Ohioans, but will not alter where he shops based on the sales tax increase.

“I’m more into convenience like most people, but I’m just getting tired of constant tax increases,” Niesley said.

MORE: Is it cheaper to buy in the next county? Compare area sales tax rates.

While an imperfect measure — because people make purchases in other counties and vice versa — the quarter-percent tax figures to add an average of $36 a year, or about a dime more a day, for every man, woman and child in Montgomery County.

Montgomery County’s combined sales tax rate will rise to among the third-highest sales tax districts in the state. Only Cuyahoga County at 8 percent and a portion of Licking County at 7.75 percent are higher. Montgomery County joins Franklin County and parts of Delaware and Union counties at 7.5 percent.

To offset a $9 million budget shortfall for 2019, county commissioners “looked under every rock” for savings, said Montgomery County Commissioner Judy Dodge. She and the two other Democratic commissioners approved the increase in June from 1 percent — where it had been since 1989 — to 1.25 percent.

The bulk of Ohio retail sales taxes collected – 5.75 percent – goes directly to the state government. The 1.25 percent to be levied by Montgomery County will be lower than several other area counties that collect 1.5 percent, but purchasers in Montgomery County, like in some areas, pay another percentage to a local transit authority. In Montgomery County, an additional 0.50 percent goes to the Greater Dayton Regional Transit Authority.

While talk of a sales tax increase drew little opposition during a nearly year-long budget process, its passage spawned a failed petition effort by Doug Barry, the Republican candidate running for an open seat on the Montgomery County Commission.

RELATED: Montgomery County sales tax repeal petition drive falls short

Barry, who sought to reverse the measure at the ballot box in November, said the sales tax increase will have a negative effect on commercial activity and over time erode the population of Montgomery County.

“Dayton isn’t the second or third-largest city in the state of Ohio, but if we’re the second or third-highest taxed county in the state of Ohio, I’m just afraid that’s going to be used against us,” Barry said. “When we’re trying to get someone to relocate or build other facilities in the county, they might look at Greene County, Warren County, Miami County — one of our bordering partners — to build a facility in. We’re not going to continue to increase our population or our tax base if just continue to raise taxes. That drives taxpayers away.”

Carolyn Rice, Barry’s Democratic opponent in November, said the rate increase will keep vital county programs from being eliminated, ones on the chopping block because of a shortfall created when the county was no longer allowed to collect sales tax revenue on Medicaid managed care.

“Additional cuts would have come primarily from law enforcement, and more cuts to law enforcement would not keep our community safe,” she said. “The opioid crisis is still a huge issue that we are tackling. And we know that our economic development efforts would have gone away. It would not help either our businesses to find the workers they need as well, nor our workers to find the jobs for today as well as the future.”

Critics like Barry say the increase will haul in more than double the $9 million the county said it needed to bridge the deficit it faced in 2019.

Local Republicans have lashed out against the tax increase on the campaign trail, and some are trying to change state law to prevent counties from enacting their own increases without a vote by citizens.

After Barry’s petition drive fell short, a local Republican state representative introduced legislation that would yank the current ability of county commissions to boost the rate.

“Instead of the board of county commissioners being able to unilaterally by a vote raise the sales tax, it will have to be a vote of the people,” said the bill’s primary sponsor, state Rep. Niraj Antani, R-Miamisburg.

RELATED: New bill requires counties to get voter OK of sales tax increase

State law already sets a 1.5 percent ceiling on permissive sales taxes that can be levied by county commissioners. That level is already maxed out in 50 of Ohio’s 88 counties. But there is room for future Montgomery County commissions to raise the rate further.

“Really this fight is now over the last quarter percent,” said Antani. “But we are going to be almost even with Cuyahoga … It’s ridiculous.”

Supporters of the new rate say the revenue will stay in the community and contribute to public safety, keep arts and workforce development programs alive and prepare the next generations for academic success.

Lisa Babb, strategic director of 4C For Children, an organization that works with the county-supported Preschool Promise, testified at a June hearing: “We see the difference in the 4-year-olds who are prepared for kindergarten … It is really impacting the community with the families, with the children, with the quality of whether they are ready to come to school or not.”

MORE: County blind-sided by township’s push to share sales tax hike money

Becky Welz of Kettering said she “might be more conscious” of the sales tax if shopping for a big-ticket item like furniture. “But for a quarter percent, probably not.”

Scholarship bears out Welz’s intuition, said Riley Dugan, University of Dayton assistant professor of marketing.

Studies suggest a sales tax increase may show up as a statistical blip around the time it’s enacted, but isn’t likely to have a lasting effect on shopping habits, Dugan said.

“There’s usually a few-month lag between when they are announced and when they actually take effect. So some people, what they will do is stock up on perishables like laundry detergent, toilet paper … a month before the change takes effect and we see a slight decrease in spending the month after the sales tax has taken effect,” he said. “Really from a long-term perspective, they don’t have too much of an effect.”

Larry Klaben, CEO of Morris Furniture Co., with stores in at least five other counties, told those attending a public meeting earlier this year that sales taxes are rarely a motivating factor in where even more expensive durable goods are purchased.

“We see the differential in sales tax between counties, and we never seen that that has changed the way people will buy in their home counties,” he said.

MORE: Warren County: New year, new sales tax rate to help pay for new jail


Where sales taxes will go for every $1,000 spent in Montgomery County

$57.50 — state of Ohio

$12.50 — Montgomery County

$5 — Greater Dayton Regional Transit Authority

FACTS & FIGURES

0.25 — percent sales tax increase.

50 — percentage of general fund revenue that is sales tax.

$19.1M — amount the increase would generate annually.

$9M —revenue the county will lose from a tax no longer allowed by the state.

$154M — county's general fund budget this year.

Sales tax increase will allow continued funding of areas slated to be cut 

Community ($3.2 million):

• Economic Development/Government Equity Program grants

• Arts and culture

• MicroEnterprise grants

• Other strategic community projects

People ($3 million):

• Adult workforce

• YouthWorks

• Preschool Promise

Criminal Justice ($5.7 million):

• Alternatives to incarceration

• Bail reform

• Court facility security

• County jail operations

Government infrastructure ($6.5 million):

• Building improvements

• Capital equipment

• Facility depreciation

Source: Montgomery County, proposed 2019 spending

Historic timeline of county retail sales taxes

1967

General Assembly enacts law allowing counties the authority to levy a county sales tax at a rate of 0.50 percent.

1969

Lake County becomes the first county to levy a county sales tax.

1974

General Assembly enacts law authorizing transit authorities to levy a sales tax, subject to voter approval, at the following rates: 0.50 percent, 1.00 percent, or 1.50 percent.

1975

The Greater Cleveland Regional Transit Authority became the first to adopt a sales tax.

1980

Greater Dayton RTA and Central Ohio Transit Authority adopt the tax at a 0.5 percent rate.

1982

General Assembly enacts law allowing counties to levy the county sales tax at rates of either 0.50 percent or 1.00 percent.

1986

Legislature enacts law allowing counties to levy an additional county sales tax at 0.50 percent for specified purposes, including the county general fund, subject to voter approval.

1987

General Assembly enacts law allowing all local sales tax levies to be enacted in 0.25 percent increments.

1992

A county 9-1-1 system is added to the list of purposes for which a county may enact an additional county sales tax.

1999

Conservation easements are added to the list of purposes for which the additional county sales tax may be levied.

2015

H.B. 64 allowed sharing of incremental sales tax growth of county or transit permissive sales tax from vendors located within a tourism development district with municipality or township where district is located.

2017

H.B. 49 allowed counties and transit authorities to increase permissive levies in increments of 0.1 percent beginning in July of 2018.

SOURCE: Ohio Department of Taxation

What isn’t taxed?

Here are a few of the many items exempted from sales taxes in Ohio.

• Food for human consumption off the premises where sold (food does not include alcoholic beverages, dietary supplements, soft drinks, or tobacco).

• Food sold to students in a dormitory, school cafeteria, fraternity or sorority house.

• Items purchased with food stamps.

• Newspapers.

• Sales by churches and nonprofit charitable organizations (excluding sales of motor vehicles, titled watercraft, titled outboard motors, off-highway motorcycles, all-purpose vehicles and personal watercraft) not exceeding six days in any calendar year.

• Sales to nonprofit organizations operated exclusively in Ohio for certain charitable purposes.

• Sales to churches.

• Sales to organizations that have been granted and have maintained 501(c)(3) status by the Internal Revenue Service.

• Sales of animals by nonprofit animal shelters and county humane societies.

• Casual sales except sales of motor vehicles, boats and outboard motors that are required to be titled, snowmobiles, documented boats, all-purpose vehicles, off-highway motorcycles and personal watercraft.

• Sales of used manufactured homes and used mobile homes, as defined in section 5739.0210 of the Ohio Revised Code, made on or after Jan. 1, 2000;

• Sales of drugs for a human being, dispensed pursuant to a prescription; insulin as recognized in the official United States pharmacopoeia; urine and blood testing materials when used by diabetics or persons with hypoglycemia to test for glucose or acetone; hypodermic syringes and needles when used by diabetics for insulin injections; hospital beds when purchased by hospitals, nursing homes and other medical facilities; and medical oxygen-dispensing equipment.

• The purchase of durable medical equipment for home use, or mobility enhancing equipment, when made pursuant to a prescription and when such devices or equipment are for use by a human being.

• Sales of investment metal bullion and investment coins.

SOURCE: Ohio Department of Taxation

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