Where Does Your Sales Tax Go?
by Ned Benton with photo from Paula Eisenberg
 (December 4, 2003) Ka-ching! You've made
another purchase at a local Larchmont
store, and for every dollar you've spent,
another seven cents has gone to the
sales tax. Ever wonder where
that money goes? The following is a basic primer on the
sales tax.
Where does my seven cents go?
Your
pennies first visit the State
Department of Taxation and Finance, which collects
the tax from the local store.
The state then redistributes the pennies
according to the laws that set up the taxes.
Most of the pennies stay with the
State itself.
Of the seven cents, one quarter of one cent
goes to local transportation - the MTA via the Metropolitan
Commuter
Transportation District.
The rest - 2.5 cents - goes to the County,
which keeps 2 cents and distributes (based on population)
one-third of a cent (0.33%) to
towns
and villages and one-sixth of a cent (0.17%) to school
districts.
This particular distribution of the sales tax
goes back to 1991 when the State approved a 1% increase
in the county sales tax. They agreed to split the extra tax
with the county, towns, villages and schools, but the State
got the lion's share.
What does this mean for
Larchmont?
In 2002, the Office
of Tax Policy Analysis reported that New York State
collected $8,247,755,984 in sales and use taxes. Of these
collections, $328,013,646 was
distributed to Westchester County.
For Larchmont and Mamaroneck, a penny here
and a penny there adds up to several million dollars. For
the
Town
of
Mamaroneck,
the
2004 preliminary budget
includes $1,000,000 in sales tax revenue. Larchmont's 2002-2003
budget include's
$575,000, and the Mamaroneck School District 2002-2003 budget
included $750,000 in sales tax revenues.
However, in the overall local government
picture, the pennies still amount to pennies - about 1% of
the school
district
budget,
and less than 5% of the Village of Larchmont budget. The
property tax is still the primary revenue source for local
government.
Is Larchmont's sales tax lower than
in other places?
The sales tax in Larchmont (and other towns
and villages) is lower than in cities like New Rochelle,
Mount
Vernon, Yonkers and White Plains. In some cities, the State
has authorized an extra sales tax - usually 1% - that is
dedicated
to the city where the tax is paid.
Does Larchmont get more sales tax revenue
if I shop locally?
 There
are many good reasons - like quality, convenience, and friendly
service - to shop in Larchmont.
However,
the village, town and school district sales tax collections
are distributed back to these governments based on population,
regardless of where the tax was originally collected.
Why did Larchmont's sales tax increase
last year from 6.75% to 7%?
You may recall that last year, County Executive
Andy Spano proposed a 1% increase in the sales tax. Under
Spano's plan, the revenues would have offset property tax
increases at the County, and (by sharing some of the revenues)
at the Town and Village levels.
The legislature did not approve the increase to benefit
local governments in Westchester County. But their opposition
was
not based on principle. They raised the statewide sales tax
1/4% anyway, increasing the
local
rate
in Larchmont
from 6.75% to 7%.
But they dedicated the money raised to State government.
Is the sales tax likely to increase again this year?
In 1866, Mark Twain observed that "No man's life, liberty,
or property are safe while the legislature is in session." The
Governor and state legislature must approve any new taxes.
Thus far, Westchester County Executive Andy Spano
has proposed
again, in his Budget
Message, to add 1% to the sales tax collected
in Westchester County. Spano describes the proposal as "The
best of bad options."
While not rejecting the proposal outright, local officials
have expressed concerns. (See a recent Gazette
article about the County Budget for more information.)
Town Supervisor Valerie O'Keeffe explained “One thing
that has bothered me and continues to bother me is
that the proposed sales tax hike would be levied only in
towns and villages, but not in cities. That
doesn’t seem fair.” The proposal would raise
the sales tax everywhere but in the major cities (Yonkers,
Mount
Vernon, White Plains and New Rochelle), where there already
are higher sales taxes that are shared with the municipalities.
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