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Battle expected over proposed excise tax

Thursday, Nov. 7, 2013 8:47 PM
Last updated Friday, Nov. 8, 2013 12:52 AM
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In what could become an annual fight, Augusta commissioners are again considering whether to levy an excise tax against the city’s numerous manufacturers to replace some of the revenue lost to a state sales tax exemption.

Prior to 2013, factories paid sales taxes on the energy they bought to manufacture their products, such as the paper, fertilizer, golf carts and ground beef made in Augusta.

No more, after Georgia House Bill 386 in 2012 exempted manufacturers statewide from paying the sales tax levy, 8 percent in Augusta-Richmond County, to be phased in over four years.

A year ago, Augusta Finance officials had a tough time ascertaining how much revenue they’d lose because the state Department of Revenue doesn’t disclose where the sales taxes are being paid.

Still, City Administrator Fred Russell suggested implementing a replacement excise tax, a move included in House Bill 386 to help local governments make up for the lost revenue.

But last year and again this year, the Metro Augusta Chamber of Commerce, Development Authority of Richmond County and area industries have lobbied vigorously against the city charging manufacturers any new taxes, even if old ones went away.

Comparing revenue from the education sales tax, which was not subject to the exemption, and SPLOST revenue, has allowed Assistant Finance Director Tim Schroer to estimate how much the city is losing from the exemption.

The estimate: About $1 million each year the exemption is phased in. In its second year, Schroer said the city is down approximately $2 million in revenue.

The funds lost aren’t just state sales taxes and local SPLOSTs. They include the city’s 1 percent Local Option Sales Tax, which is used to offset the property tax bills of every property owner, the “county sales tax credit” that appears on every tax bill, Schroer said.

The local excise tax on energy recommended by Russell this year – 2 percent, the maximum authorized by House Bill 386 – would generate $1.5 million toward the city’s general fund, which pays the salaries of sheriff’s deputies, tree trimmers and other service workers.

Raising the millage rate to replace the lost funds would mean about a .25-mill increase each year the exemption is phased in, for a total 1 mill increase in the fourth year, Schroer said.

Many of the companies are already among the city’s largest taxpayers. According to a Richmond County Tax Commissioner publication, International Paper, PCS Nitrogen, Augusta Newsprint, DSM Chemicals, NutraSweet, Procter & Gamble, E-Z Go, Tyco, Thermal Ceramics, Martin Marietta and Solvay Advance Polymers are among Augusta’s highest-billed taxpayers. International Paper is billed more than $1.6 million; the rest are charged $300,000 and up annually.

Those top taxpayers also employ more than 4,500 people from around the area, according to Development Authority data.

While American manufacturers as a whole are enjoying record profits, having streamlined during the downturn, Augusta needs to maintain an “edge” and not replace the lost local revenue, Augusta Commissioner Wayne Guilfoyle said.

“It’s opening doors where other counties are shutting doors,” Guillfoyle said.

Other counties, at least 50 of Georgia’s 159 have implemented the excise tax suggested by House Bill 386, according to a list compiled in May by Association County Commissioners Georgia. They include Columbia, which imposed a 2 percent levy in April, as well as Chatham, Dougherty and other mostly smaller, rural or suburban counties.

Barbara Cole, the controller at Resolute Forest Products, said electricity is the commodity company’s biggest cost, about 26 percent.

“Even with the reduction, the cost of our power is higher” than neighboring states, Cole said. “We respectfully request that the excise tax not be imposed.”

David Lee, the vice president of finance at DSM Chemicals North America, told commissioners his plant paid $1.5 million in property taxes and employs 600 people between its manufacturing and maintenance ventures.

“It’s a healthy chain,” Lee said. “At the same time, we operate on very, very thin margins. Even a small 2 percent increase has a significant impact,” including on the plant’s capacity to raise capital for expansion.

Augusta commissioners will revisit the excise tax proposal at a budget work session Tuesday where they will again attempt to plug an $8.5 million hole in next year’s budget.

Comments (11) Add comment
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nocnoc 11/08/13 - 06:38 am
Here is a TAXPAYER suggestion.

Consider spending less to be able to TAX LESS.

Riverman1 11/08/13 - 06:41 am
Don't Be Shortsighted

A healthy climate for industry in Augusta is necessary if it is to grow. Anything counterproductive to the business bottom line is going to affect their evaluation of local operations. For instance, it has been reported elsewhere the DSM factory here is in a precarious position. This could be a major factor for them considering their future in Augusta.

You can never go wrong with business when you have fewer taxes and less government interference. These industries enlarging as the economy improves and new facilities moving in to take advantage of our low taxes and assets will provide a bonanza in tax revenue. Being shortsighted going after the quick money is a mistake.

Riverman1 11/08/13 - 06:42 am
How Much Does South Augusta Receive?

It appears all those industries but one are in South Augusta. The taxes they pay listed in the article are huge. It would be interesting if we could determine what percentage of the tax revenue THEY PAY stays in South Augusta.

mosovich 11/08/13 - 07:03 am
Here's an angle..

It's often brought up about the people on the "welfare" system and how they bring down a community by using so many resources.. Well, here you have able body companies who are basically taking $1,000,000 annually from the system.. Corporate "welfare" at it's finest.. We always focus on people who are using up the system and cost our local and state gov't so much money, but what about these companies that get billions of dollars in tax breaks nationwide.. Take the NFL.. 10 BILLION in revenue, they pay NO taxes.. Yep, they are supposedly "non profit".. Just think if they were as they should be "for profit".. Take let's say just 5% of that, $500,000,000 in taxes.. That's a lot of money that could surely help out..
You and I pay on average 25%, yet these companies making billions pay in some cases nothing.. To me, that' WRONG!!

LuvMyTown 11/08/13 - 07:21 am
Massive tax cut on industry = higher residential property taxes


Fred is right on this one. Support the excise tax.

Riverman1 11/08/13 - 07:46 am

Mosovich, you're not referring to the companies in the article I hope. It's clearly stated the local taxes they pay. That's in addition to their corporate income taxes, taxes their stockholders pay on dividends and sales of stock, plus the taxes their employees pay. Keep in mind, "tax breaks" given to corporations are just another way of saying the government won't take so much of THEIR money. I'd like to hear about the "resources they use bringing down a community."

justthefacts 11/08/13 - 08:10 am

It should be noted that most of the revenue collected by the NFL is redistributed to the teams. That is when the Feds get their pound of flesh.

Little Lamb
Little Lamb 11/08/13 - 01:07 pm

No, LMT, you have swallowed the Fred Russell Kool-Aid. Augusta does not need to raise residential property taxes to "make-up" for anything. Just spend wisely what you take in and don't go in debt. That's the way to run a city.

burninater 11/08/13 - 04:35 pm
"While American manufacturers

"While American manufacturers as a whole are enjoying record profits, having streamlined during the downturn, Augusta needs to maintain an “edge” ..."
So we resort to back-end bribery?!

Call it what it is, folks. We're paying more so a select few private shareholders can walk away with it.

Bulldog 11/08/13 - 05:01 pm
Cut Spending!

Cut spending... It's not that difficult a concept. Government is not yo mamma!

Darby 11/08/13 - 11:47 pm
As usual, the libs (economic geniuses that they are)

fear the free market and believe that business only exists to provide jobs for Democrat voters and money for politicians to throw around.
Profit, to them, is a really dirty word.

By all means, raise more taxes on businesses and drive them out of the market and out of Richmond County. That's the way OzBama, the Great and Powerful (A legend in his own mind) would do it.

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