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Commissioners debate merits of excise tax

POSTED: September 24, 2012 8:50 p.m.

Effingham County officials are continuing to ponder whether to enact an excise tax the state is abandoning.


Earlier this year, state lawmakers passed a law that will phase out, over a four-year period, the local sales tax on energy used in manufacturing. But the new state law also allows local governments to recoup lost local sales taxes.


“The state got rid of its portion of the tax,” said County Administrator David Crawley. “But it allows counties to come back and recoup the county portion of the tax. Otherwise, the remaining of the state sales tax would be eliminated.”


The tax is collected from companies that sell energy, such as electricity or natural gas, to manufacturers within the county. If the excise tax is enacted, the county would retain a 1 percent administrative fee for collecting the tax and distributing it to any participating cities.


Cities can levy tax but only on industries within their city limits. Crawley said the vast majority of the industrial and manufacturing sectors are located in the unincorporated county.


The tax would not apply to those plants engaged in producing electricity for resale. The sales tax on natural gas used to produce electricity for resale is one of the county’s biggest sources of sales tax revenue.


“It does not impact the energy used to manufacture power,” Crawley said. “The sales of natural gas for power are not impacted by the removal of the sales tax.”


Ostensibly, the state law was enacted to heighten the state’s competitive advantage. Concerns were offered over whether the county could put itself in a bind in recruiting new industries.


“Isn’t this the same tax the state just got rid of?” said Jack Garvin. “They said it was to help bring in business to the state. Didn’t they do this to make it a level playing field? Wasn’t that the idea? Let’s don’t do this.”


Said Commissioner Vera Jones: “If some counties implement this and some don’t, the ones that don’t may be in a better position to attract that business. That could be a consideration.”


Effingham County Industrial Development Authority CEO John Henry said he has no opinion on the matter but would like to be involved in future discussions on a possible excise tax.


“We’d like to look at some numbers and see how it is going to either hurt our competitiveness or increase our competitiveness,” Henry said.


Crawley said the county spends SPLOST revenues in some cases on economic development projects.


How much losing that tax revenue would impact the county, Crawley wasn’t sure, but it could affect both local option and special purpose local option sales tax revenues.


“We’ve made some assumptions as staff,” he said, “but they are pure speculation. We estimate $200,000-$250,000 a year. That’s a wild stab. That’s not even an educated guess.”


Crawley added the county has sent out letters to industries to see if they are willing to respond with information and see what it impact it would have on them financially.

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