For this article on public finance, let’s talk about sales tax and how sales tax revenue can affect property taxes. Normally, these two things are completely separate, but when writing a budget, these two items have an interesting interplay.
Texas adopted a sales tax back in the 1960s. The state collects 6.25% and up to 2% is available for local governments. The local community is free to divide that 2% however it chooses, with some statutory limitations. For Rockdale, the city collects half (1%) and Milam County and the Rockdale MDD each collect the other half (0.5% each).
The city has very little control in how much sales tax revenue it receives – it is all dependent upon how many transactions occur in the city.
Some cities have such a large sales tax base that they can ‘live’ off the sales tax and do not have a large property tax rate. For example, the City of Canton, home to the large First Monday Trade Day, received so much in sales tax revenue that for the longest time they did not even have a city property tax rate. Now they do.
There are other communities that operate their own electricity or natural gas utility systems. These towns can also use that non-tax money to offset their need for property tax revenue.
When this non-property tax revenue is high, then a city can afford to rely less on property taxes. When non-property tax revenue shrinks or is nonexistent, then a city must find other ways to pay for operations. Many times, they raise property tax rates.
The City of Rockdale makes around $1 million in sales tax each year. That may sound like a lot, but there are other similar-sized communities that make much more.
Getting more city sales tax revenue is going to be a function of more people transacting business in Rockdale and more businesses collecting sales tax.
Your city government is, at least, now on a path to that. The new Cornerstone Subdivision is underway and will add new residents to Rockdale. Other new subdivision developments are in the planning process. The new Dollar Tree is evidence that more retail outlets are coming. New construction projects inside the city also contribute to sales tax revenue.
Turning the city’s fiscal ship and providing real property tax relief for residents is going to be a long process, but we have started.
We are going to do great things in Rockdale, Texas!
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