In the 2009/2010 each Rutherford County household will be expected to pay $2,655 in taxes in order to support the county's plan to spend $47.8 million.
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Tax Burden Breakdown
Of the $2,655 collected in taxes from each Rutherford County household:
- $1633 will be collected in the form of property taxes
- $533 will be collected as sales taxes
- $489 in various fees and charges collected by the county, or state/federal taxes sent back to the county in form of grants and subsidies.
Tax Burden Due to Debt
In order to maintain the county's debt, each household will pay $450 in taxes in 2009/2010.
In other words, had the county stayed out of debt, each household in the county would have to pay $450 less in taxes each year.
The reverse is also true, namely, if the county increases its debt, each household will have to pay more in taxes to support the payments for that debt.
Effect of New Spending and/or New Debt
Suppose a scenario where the county increases its debt by $30 million. Each household would have to pay $193 more in taxes to support the debt payments of $3.5 million per year.
$3,500,000 / 18,000 = $193.
Another way to look at this, without considering new debt, is to envision the county spending $3.5 million more than it needs to, thus being in need to collect an additional $193 from each household to pay for this new spending.
There are only three methods that the county can use to gather the additional $193 per year from each county household:
Sales Taxes, Fees & Charges on Government Services, Permits, etc.
Sales taxes and fees/charges are only paid when county residents choose to make purchases. The county has no way to collect the new $193 per household, as it has no ability to force people to make more purchases.
The county gets 2% from each sale transaction as a local sales tax (the rest is a state sales tax), meaning that each household has to spend $26,650 per year in order for the county to collect the $533 per household.
$26,650 * 2% = $533.
In order for each household to contribute $193 more in sales taxes, it would have to spend an additional $9650. The county has no way to force each household to spend this much money so that they can collect the sales taxes.
$9,650 * 2% = $193.
However that requirement only restricts 1/4th of all sales tax revenues for this purpose, so the majority of the sales tax revenues are at the discretion of the county.
Property taxes, on the other hand, are something that the county forces each county resident to pay, without regard to the household's spending decisions or income, except in extreme cases (which make up only a fraction of the cases).
Thus property taxes always end up being the method by which new spending is funded, even if the county never planned to use this approach. It is simply the only income the county can control.
There are two ways the county can collect the $193 additional dollars per year in property taxes from each household:
Method 1: Increase The Appraised Value of The Property
A household appraised at $100,000 pays $530 per year with a 0.53% tax rate.
$100,000 * 0.53% - $530
When appraised at $137,000, the county will collect additional $193, or a total property tax of $723 per year from the same household.
$137,000 * 0.53% = $723 = $530 + $193
This is typically the preferred way, as the appraised value increase gives the illusion of no tax increase, and only a few property owners challenge the county's new appraised values.
Method 2: Increase The Property Tax Percentage
For the same household in the above examples, without an increased appraised value, increasing the tax rate from 0.53% to 0.72% would still cause the household to pay the additional $190 in property taxes, and increase from the original $530 under the lower tax rate to $720 under the new tax.
Naturally, this is a more difficult approach to implement by the county, as it openly increases the tax rate, which is a very visible number and invites much criticism, scrutiny, and even revolt.
New Spending Does Increase Property Taxes
Ultimately, in a county operation like the one in Rutherford, every additional decision to spend more money will affect the property taxes, due to the lack of control and stability of the sales tax and fees/charges based revenue.
You can view the detailed budget line items at the following link: Rutherford County NC 2009 2010 Budget
- $47.8 Million - planned to be spent in 2009/2010 by collecting taxes from Rutherford county residents in the following manner:
- $29.4 Million (61%) - collected from property taxes
- $9.6 Million (20%) - collected in sales taxes
- $7.1 Million (15%) - other fees and income from state/federal subsidies.
- $1.7 Million (3.6%) - spent from the county's savings fund
Based on the latest county debt report March 4th 2009 here are a few highlights:
- $70 Million - the total amount of money borrowed by the county
- $8.1 Million - what the county pays out every year for debt payments, interest+principal
Per Household Breakdown
- 18,000 - Number of households in Rutherford county
- $2,655 - amount collected in taxes from each Rutherford county household to fund the above spending.
- $1633 - average yearly property tax collected from each household in the county
- $533 - average amount in sales taxes collected from each household in the county
- $3888 - the amount of debt per Rutherford county household.
- $450 - amount of taxes each household pays to support the debt payments.
- 17% - percentage of each household's taxes that go to county debt payments.