It’s your money

Home rule gives cities and villages wide and flexible powers in a number of ways, ranging from intergovernmental agreements to rental inspection regulations. Home rule, however, is most commonly used to generate revenue through its broad taxing powers. The primary focus of this letter is on the taxing powers available with home rule. A home rule municipality can constitutionally tax anything that is not income, occupations or earnings. With few exceptions, governing bodies of home rule units do not need to ask voters’ approval when instituting a tax.

The following list is not meant to be exhaustive, but rather reflects the most commonly imposed home rule taxes:

1. Municipal Retailers and Service Occupation Tax (Sales Tax): This is basically a sales tax that applies to qualifying food, drugs, goods and medical appliances. This does not apply to merchandise that requires title or registration.

2. Hotel/Motel Tax: This tax revenue may be applied to any public purpose while non/HR is used only to promote overnight tourism limited by a 5 percent cap.

3. Gasoline Tax: A city council official has already investigated this one.

4. Use Tax: This is a tax on all tangible property that is registered with the state. For example, new or used automobiles, boats, trailers and any other vehicles.

5. Food and Beverage Tax: This tax is above and beyond the sales tax and authorizes municipalities to license and regulate all eating establishments.

6. Property Tax: Home rule communities are not subject to statutory limitations on the amount of property taxes they can levy, nor are they subject to property tax caps. If a non/home rule city wants to go beyond the cap, it must be approved by referendum.

And then there is wheel tax, amusement tax (theaters, bowling alleys, etc.) real estate transfer tax and the list goes on.

Also, let us not forget that a home rule city can issue general obligation bonds without the approval of our local electorate. To pay principal and interest on these bonds, most home rule units rely on various kinds of ad valorem taxes — taxes based on the value of private and business holdings within the municipality. Property and real estate taxes are the most common type of ad valorem taxes available to the home rule unit. For example, if a town creates a bond issue to fund a street or sewer project, it may increase the property tax rate in order to ensure it will have sufficient income to meet its obligation to bond holders. Remember, home rule units are not susceptible to property tax caps.