Nearly half of all sales tax generated in Osceola County last year came from tourists and nonresidents, according to a new report.
The news comes less than two months before residents vote on a proposed 1 percent sales tax increase that county staff say will raise $67 million a year for transportation projects.
Who did the report and why?
For months, county officials claimed that visitors pay a big chunk of locally collected sales tax - but were unable to prove it or cite a specific percentage.
That’s why an outside expert was hired to crunch the numbers, said Osceola County spokesperson Lisa Nason.
“We commissioned this report so that taxpayers and local voters would have access to independent, up-to-date information regarding the impact that non-residents have on our sales tax revenues,” Nason said.
Research was led by economist Hank Fishkind, a long-time tenured University of Florida professor with more than 30 years of experience in the private and public sector. He’s done work for other jurisdictions like Manatee County, and his weekly “Fishkind Conversations” can be heard Tuesday mornings on WMFE, Orlando’s local National Public Radio affiliate.
What they found and how they found it
Fishkind and his company, PFM Group Consulting, LLC, used three methodologies to draw a conclusion, including surveys and comparisons with similar counties.
The analysis found that Osceola County’s average per capita income is relatively low (around $32,000 per year), despite healthy sales tax revenue. This indicates that non-residents are likely contributing to the local sales tax economy, according to the report. Researchers used statistics from the Florida Department of Revenue to explore which industries generate the most sales tax in Osceola County.
They then used surveys from local business owners and data from the Florida Department of Revenue to estimate what percentage of each industry’s sales likely came from residents and non-residents.
For example, tourists are likely to account for most hotel and lodging dollars spent, while few if any tourists are likely to buy lumber in Osceola County. Survey results found that some industries were more likely to draw tourist dollars, like general merchandise stores (68 percent) while places like grocery stores showed a much lower percentage of non-resident patrons. Researchers also compared Osceola’s 2018 sales tax numbers to counties with similar per capita incomes, and finally, used an economic analysis term called regression to evaluate variables and constants.
Researchers concluded that about 49 percent of all sales tax dollars collected in Osceola County last year came from non-residents (by taking an average of the three methodology results). “The results from all three approaches are very consistent,” the report noted.
“Since these three different approaches produce such similar results, the conclusions are reliable.” Osceola County paid PFM $7,500 to conduct research, according to Nason.
Other impacts of proposed sales tax
Volusia County conducted a similar analysis in February ahead of their half-penny sales tax vote May 21. Those results found that 35 percent of their sales tax revenue comes from tourists.
The current Osceola County sales tax proposal would equal paying an extra dime on a $10 lunch, an extra penny on a $1 pack of gum or an extra 50 cents on a $50 steak dinner. For big-ticket items like cars and boats, the tax is capped and only applies on the first $5,000 - or an extra $50 in sales tax.
Using sales taxes to pay for transportation can help spread the cost to everyone who spends money and uses roads in Osceola, Fishkind said.
And although sales taxes are regressive – meaning they aren’t adjusted based on income – certain factors limit their negative effects on low-income earners.
“Remember, things like groceries, medical items and health care are exempt from sales tax in Florida,” said Fishkind.
Clck here to view the full report.