Enjoying their majority in the General Assembly, North Carolina Republicans may find it short lived.
Because Republican N.C. Senate Majority Leader Harry Brown of Onslow and Jones counties introduced a bill to redistribute state sales tax revenue to counties, cities and towns based on population rather than where the sale occurs. This will anger taxpayers who are voters.
State sales tax revenue is now distributed among the state’s 100 counties using ad valorem tax collection (property tax) — point of sale distribution — as the base, the method of distribution. So 75% of the local option portion of sales tax revenue stays in the county or the city where sales occur, and 25% is distributed according to population.
Mr. Brown proposes to change that over four years so 80% of the money is distributed by population and 20% by sales location.
Changing the sales and use tax distribution from the basis of ad valorem tax to population is — we’ve said it before — redistribution of wealth, or income. If it happens it happens at the expense of the state’s urban centers of population.
Mr. Brown’s plan, his bill, a mistake, would move millions in state sales and use tax revenue from the state’s urban counties and cities and the coastal counties of Dare, Carteret and New Hanover, which have just as much need, to rural counties. This would impact tourism and the state’s overall economy for the worse.
At the expense of the state’s centers of population, this redistribution of income would penalize the state’s most populated areas, Charlotte and Mecklenburg county, Raleigh and Wake County, the Triangle, the Triad and the three coastal counties.
Mr. Brown says his plan would help 83 of the state’s 100 counties, rural counties, meaning it would hurt 17 urban counties, forcing the counties and cities in those counties to raise property taxes — considerably.
If Mr. Brown’s bill is enacted over four years, in the fourth and final year of his grand plan, FY 2019-20, Atlantic Beach would give up 8% of its ad valorem tax revenue, Beaufort, Bogue, Cape Carteret Cedar Point, Newport, Peletier and Pine Knoll Shores would each give up 9%, Emerald Isle would relinquish 10% and Morehead City would relinquish 11%. The county’s tax revenue would drop 10%.
This would require massive tax increases here and in the 16 counties, hurting businesses and property owners.
On NC Policy Watch Monday, Steve Ford, former editorial page editor at Raleigh’s News Observer and now a volunteer program associate at the N.C. Council of Churches said “It’s true that an urban county such as Mecklenburg or Wake faces additional expense to support the retail zones where many folks who live in outlying communities do their shopping. So from that standpoint, a sales tax scheme favoring the counties where goods are sold makes sense.
“It’s also true,” he said, “that rural counties, with little retail and meager property tax bases, can use more money for schools and basic services. Those counties favor tilting sales tax revenues more toward where people live.”
He said the Senate had a choice. “Rather than helping smaller counties at the expense of big ones — which then might be forced to raise property taxes to make up the difference — the Senate could have called a halt to the state’s series of income tax cuts. Then, it could have taken the income tax revenue that it proposes to forgo and channeled it into aid for rural counties in distress.” But it didn’t do that.
Knowing some rural counties are hurting financially, some might also say they’re culturally deprived. Might Mr. Brown and the N.C. Senate mandate they have cultural events? At what cost? And who would pay?
Residents in the state’s urban counties and cities, the state’s largest population centers, vote. Their votes, their clout, could and would likely carry the day for a political party.
If Mr. Brown and his Senate colleagues enjoy what they do and perhaps might do, they must comprehend what changes, financially and politically, they portend to inflict on the state’s urban counties and cities, the state’s centers of population with their Senate budget proposal.
Should they continue on this unwise, reckless course, unwittingly following President Obama’s liberal Democrat plan of redistributing income, Mr. Brown and the Republican majority in the General Assembly shouldn’t be surprised if they find themselves displaced, turned out of office, and sent home because of urban voter dissatisfaction at being forced to pay higher property taxes.
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