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Sales and use tax shows if consumers are spending
By Kalea Hall
YOUNGSTOWN
People spending more is a positive to economists.
It shows confidence in the current state of the economy, while at the same time helping the economy.
Consumers spending “is not booming,” said Mekael Teshome, PNC Bank economist. “We have seen a steady flow of spending.”
That steady flow shows many consumers are not overburdened by debt as they once were, more people are working and willing to spend money and lower costs on certain items have led consumers to buy other items.
Revenues from sales and use taxes in the Mahoning Valley are one way to measure consumer spending locally. County sales and use tax is charged on goods and services such as employment services, lawn care, fitness memberships and dry cleaning. Several items are exempt, including food and prescription medication. The revenue generated goes to run county governments.
In Mahoning County, sales and use tax revenue increased 9.5 percent year over year to $43.79 million in 2016, according to the Ohio Department of Taxation, but a 0.25 percent increase in the tax rate is in part a reason for the increase from 2015. The 1.25 percent tax rate went into effect in April 2015.
In Trumbull County, sales and use tax revenue increased 2.9 percent year over year to $26.56 million. The 1 percent tax rate has been in effect since July 2005.
In Columbiana County, sales and use tax revenue decreased 2.37 percent year over year to $16.44 million. Its 1.5 percent tax has been in effect since April 2007.
“When I see sales and use tax going up, I attribute it to a steadily recovering economy,” Teshome said. Consumers “have more fire power than they did. That leads me to believe they are spending more.”
With the impending loss of the state’s Medicaid managed-care organization sales tax, tax revenue from other sales will become even more important.
“It is going to hurt all counties,” Mahoning County Commissioner Anthony Traficanti said of the Medicaid MCO tax loss.
That tax will expire June 30 because of a federal rule that says the state cannot impose the tax on Medicaid MCOs if it does not impose this tax on other MCOs.
Mahoning County expects to lose between $3.4 million and $3.7 million with the loss of the Medicaid MCO tax.
Because of the loss, the county projects it will not see much of an increase in overall sales and use tax in 2017.
“We are estimating $43.9 million,” said Ralph Meacham, Mahoning County auditor. “We are thinking we will have enough organic growth to handle that.”
Trumbull County hasn’t seen the growth in sales and use tax revenue that it would like. “My comments to [the commissioners] have been to raise revenue or cut expenses,” said Adrian Biviano, Trumbull County auditor.
The largest expense for Mahoning and Trumbull counties is justice, which includes the courts, the jails and other offices.
“The jail is a major concern,” Trumbull Commissioner Frank Fuda said. “We need a lot of improvements there.”
Trumbull County’s leaders say they remain dedicated to being fiscally conservative. Commissioner Mauro Cantalamessa feels increasing the sales and use tax rate should be a last resort.
“We are going to stay vigilant to try to contain costs and search out other means of revenue,” Cantalamessa said.
More spending in the counties means more money to the county governments for operation.
Retail sales in 2016 increased 3.8 percent, according to the National Retail Federation. This increase excludes vehicle, gas and restaurant purchases. NRF predicts retail sales in 2017 will increase between 3.7 percent and 4.2 percent over 2016 levels.
Teshome says this year has two positive factors at play: aspects of the economy are strong or getting stronger, and a lot of weight on the economy has lifted.
“The job market is getting better,” he said.
“We are probably close to full employment. We expect a good year. The labor market is getting better and that should lead to higher wages.”