For several months there has been a great deal of talk about an “effective tax rate.” People have said that even though Lakeland will now have one of the lowest tax rates in Shelby County, the effective tax rate brings it to one of the highest. We believe that this claim is incorrect and irresponsible and those who make this case do so to purposely mislead the citizens of Lakeland. So we will attempt to dispel this myth by explaining what an effective tax rate is, what qualifies as a tax, and what the difference is between a tax and a fee.
First, what is an effective tax rate? Well, that depends on who you talk to. Different municipalities calculate their property taxes differently with a myriad of formulas, but each source agrees that the effective tax rate is the total amount of taxes paid for a property. In Lakeland we pay the City’s tax rate (currently proposed $1.24/$100 of assessed value) as well as the Shelby County tax rate ($4.05/$100). The assessed value is 25% of the appraised value of the property. So Lakeland’s effective property tax rate would be the sum of Lakeland’s city tax rate and Shelby County’s tax rate.
But critics of Lakeland will add other items into their calculations for an effective tax rate such as fire fees that are assessed by Shelby County and appear on your MLGW bill. They say that due to this fee Lakeland’s effective tax rate is pushed northwards of $1.80 making it one of the highest tax rates in Shelby County. The first problem with this assertion is the fact that the fire fee is just that, a fee, not a tax. A tax is a compulsory payment levied by a government on citizens of its jurisdiction in order to defray the expenses of that government. In other words, a tax is a payment made by an individual for which there is no one discernable item or service bought with that payment. You see sales tax on groceries that you buy, but the money collected by that tax does not go towards the cost of those groceries. A fee, however, is a voluntary payment to an entity for special services that gives a specific advantage to the person paying it or defers the cost of a specific service. The delivery fee that you pay to have your groceries delivered to your door is for a specific service and goes to defer the cost of that service. So we can see the distinct differences between taxes and fees, but how does that relate to Lakeland?
The fire fee that has been discussed is paid by Lakeland residents because the City contracts with Shelby County for fire, emergency and hazmat services. The fee is assessed based on the square footage of a dwelling and so varies from house to house. This fee goes specifically to defer the cost of fire services in Lakeland. When you pay that fee, you are paying for a specific service and to defer the cost of the service to the government. Municipalities such as Bartlett and Arlington that have their own fire services do not pay this fee, instead the cost is included in their effective tax rate as it is paid through their property taxes.
So, the fire fee can not be included in a conversation of a tax rate any more than a sewer fee, a service fee or fees paid for satellite TV equipment. So why do they make that argument? Mostly because it is an easy way to cause citizens to believe that their representatives are lying about taxes. If they can make citizens question certain members of the government, they have a greater chance of getting those that they disagree with out of government. Those pushing this false narrative do not care about the truth, only how they can manipulate anxiety over the word “taxes” to their own political goals. Even the number that they throw out, somewhere around $1.80, is not quite true because the fee varies by square footage and is not proportional as property taxes are .
So the next time you are on social media and you see a post discussing how high your tax rate is, remember that the methods that they use for their conclusions are not correct by the very definitions of the items they discuss. Look at their motivations for disseminating inaccuracies and maybe ask them why they choose to propagate misinformation and bring into question this great city in which we live.
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