In general, a HOST is intended to roll back a portion of property taxes charged on primary residences and offset that with a new sales tax. Lee said the average Cobb County household has the potential to save several hundred dollars a year on their property tax under the plan. However, if a HOST were put in place today, the sales tax would increase to 7 percent.
“It’s supposed to be a dollar-for-dollar offset, substituting a dollar of sales tax for a dollar of property-tax relief on your homesteaded property,” said Clint Mueller, legislative director for the Association of County Commissioners of Georgia.
Lee hopes that after presenting more detailed plans to residents next year, commissioners will vote next fall to request local legislation in the 2014 General Assembly. If both of those are approved, county voters would decide the issue in November 2014.
The HOST proposal was a campaign pledge Lee made in his re-election bid this summer.
“I don’t want to (ask) the Delegation to do something that we haven’t done an extensive outreach to the community,” Lee said. “We’re going to need to take six to eight months to (outline) what it represents, so that everybody is clear what it means to the individual home property tax owner.”
Goods purchased in Cobb are currently taxed at 6 percent. Four percent goes to the state, 1 percent goes to the county’s special purpose local option sales tax projects and 1 percent is another SPLOST for schools.
The HOST sales tax would equal 1 percent, but unlike the two SPLOST taxes, a HOST would remain permanently in place until voters approved a referendum to end it.
State Rep. Ed Setzler (R-Acworth), chairman of the Cobb legislative delegation, said he is open to hearing Lee’s proposal.
“With a county like ours, it has potential,” Setzler said. “I keep an eye more on spending than the source of the revenue. Those that are keeping spending in check and are being reasonable and smart about what we buy, then I think there could be some real advantages to it. I just need to understand exactly what he has in mind and I’m eager to hear from him.”
Lee said the county generates between $110 million and $120 million a year through its 1 percent sales tax, while it collects about $80 million a year in homesteaded property tax.
“It takes the general-fund portion, rolls it back, which is about $90, $95 million, sets aside about 10 percent for capital improvement, and then what’s left gets applied to business taxes across the board,” Lee said. “Folks have to understand: It’s the general budget that it sets aside. It doesn’t set aside the fire and it doesn’t set aside the debt service. And by the time that we get this going, the debt service will probably be gone anyway. So it just sets aside the general fund portion of your property tax.”
While there are a few exceptions, Lee said 99 percent of homeowners in the county will have property taxes rolled back.
Voters in Cherokee County, where Mueller, of the ACCG lives, will vote this November on whether to have a HOST. Those who own homes valued at $100,000 or more would likely benefit from a HOST, he said.
“I calculated how much I would probably pay in additional penny sales tax per year, versus how much I’d get in property-tax relief on my home,” Mueller said. “I’d probably come out a few hundred dollars better on the HOST than I would under the current system.”
Mueller said the system creates zero new revenue for the county with one exception: State law allows up to 20 percent of the HOST to be used for capital expenses, though Cherokee commissioners adopted a resolution pledging not to use any of the funds for capital, Mueller said.
Lee said his plan would be to use 10 percent of the HOST to pay for capital maintenance costs such as upgrading computers.
“In past years we’ve funded a lot of our capital improvements and stuff like that out of surplus,” Lee said. “The day of having huge surplus at the end of each year is gone because things are so tight.”
Lee said a HOST would also diversify the county’s revenue sources.
“By being diverse, in other words, having a different mix, you’re not as vulnerable to each fluctuation in each revenue stream,” Lee said. “That’s a more stable financial model.”
In an economic downtown, he said, sales taxes take the immediate hit and are later followed by property taxes. In a recovery, sales taxes are first to recover, followed later by property taxes.
In addition, a certain percentage of sales tax is paid for by non-Cobb residents.
“Now you’re lessening a burden on Cobb residents who pay 100 percent of the cost now that go through property taxes,” Lee said. “You can argue all day long whether it’s 5 percent or 30 percent, but even if it’s 5 percent, that’s a 5 percent improved tax position for homeowners that they don’t have to cover.”
Renters, such as Cobb’s large population of college students, though, would pay more.
“They wouldn’t get much benefit from a HOST because they don’t own a home, but they would contribute more to tax relief for homeowners in that they paid this additional penny, because most all of them are shopping at the grocery stores in Cobb County,” Mueller said. “With any type of tax reform, you’re always creating winners and losers. It’s just a question of who are the winners and who are the losers.”
DeKalb and Rockdale are the only two counties in Georgia that already have a HOST, a tax that was not created until 1995, Mueller said.
Instead, many counties have a LOST — a local option sales tax, which was created in the early 1980s.
A LOST is a penny just like the HOST tax, but the difference is the amount of money that’s raised provides a tax rollback on all types of property — industrial, agricultural, commercial, rental.
“You name it, it’s everything,” Mueller said. “A HOST tax raises the same amount of money as a LOST tax. However with a HOST tax, 80 percent of it has to go towards property tax relief on somebody’s homesteaded property. It targets the tax relief to the primary residence, so for somebody that owns nothing but a home in Cobb County, they’re going to get much more tax savings from a HOST than they would from a LOST. But if you’re somebody that owns lots of other types of properties, maybe you have a big farm or maybe you have commercial properties, things of that nature, then a LOST may by more financially beneficial to you.”
By the time the HOST law was created, most counties in Georgia had already adopted a LOST tax. The law prevents a county from adopting both.