Jackson County commissioners say state lawmakers’ decision to play Robin Hood by assessing sales taxes on residents of 100 counties to benefit those in 79 counties is not just a bad idea, it’s legally questionable.
Anticipating possible court action, the county’s elected leaders instructed Attorney Heather Baker to review the constitutionality of the General Assembly’s plan. Manager Chuck Wooten’s task is to rally government leaders from the 20 other counties also excluded from receiving tax revenue.
The fierce local opposition comes as commissioners react to residents being forced to pay taxes for services that do not directly help them. “Where’s our money? It’s going to others,” Commissioner Mark Jones said during an Oct. 1 board meeting. “Democrats, Republicans and unaffiliated all need to come together and fight Raleigh. We may not win, but we can be heard.”
Starting in March, local dollars will flow into a $84.8 million state purse for distribution elsewhere as sales taxes get tacked onto auto repairs, appliance installation and more. Department of Motor Vehicle fees also will increase. A standard eight-year driver’s license goes from $32 to $40. The fee for a learner’s permit increases from $15 to $20.
“We need to have a little caucus and try to develop some strategy,” Wooten said. “Among those 21 counties are some of the most powerful counties in the state of North Carolina, with enough votes to pass or defeat any bill that comes before the legislature. The votes exist. The question is, how do we go about trying to refocus the attention and conversation on this topic?”
Franklin resident Ronnie Beale, president of the N.C. Association of County Commissioners, said he believes legislative leaders decided that Macon, Jackson and other tourism-dependent counties enjoy adequate sales-tax infusions through vacationers. Watauga, Avery and coastal counties also were left out. Urban counties such as Buncombe were excluded because legislative leaders from rural areas successfully argued that metropolitan districts rake in regional shopping dollars.
Beale, a Macon County commissioner, said he opposes the tax because he believes it will hurt middle-income and poor residents. But if levied, he said, the revenue raised “should benefit all counties, not a few.”
State lawmakers say they’ll use the money to strengthen public education and jumpstart economic development in struggling areas of the state. Jackson Commissioner Jones rejected that argument. North Carolina experts don’t consider many of those counties economically distressed, he said, but Jackson and Macon are Tier 1 counties. This N.C. Department of Commerce designation is used to pinpoint the least prosperous areas by measuring unemployment, median household income, population growth and property tax base. The three counties about to receive the biggest sales-tax windfalls are Tier 2, placing them above Jackson’s Tier 1 and in the middle of the three tier designations. Harnett County will get $3.87 million; Davidson County, $3 million; and Randolph County, $2.6 million.
In a telephone interview, Jones said other far-western counties would likely support Jackson’s efforts to fight the state tax plan. Although these local governments will receive sales-tax revenue, the amounts are significantly lower than what’s being distributed downstate. Swain (Tier 1) will get $275,000; Clay (Tier 1), $274,000; Graham (Tier 1), $263,000; Cherokee (Tier 2), $203,000; and Haywood (Tier 1), $34,000.
Landing on the exclusion list surprised Jackson County leaders. A few weeks ago, they were anticipating possible revenue gains, not losses, as a different sales-tax distribution proposal was debated. Macon County has been slower to react: The prior plan would have cost that county $1 million. “As bad as this is, it’s better than that,” Beale said.
Macon County Manager Derek Roland fears the new tax could harm current sales-tax collections. “If people are paying extra tax, will that cut down on them buying other goods?” he said. “It’s early in the game, but I’m curious about that impact.”
N.C. Rep. Joe Sam Queen, D-Haywood County, voted against the state’s $21.74 billion budget; but, as member of the minority party, he wasn’t a player in last month’s negotiations between the Senate and House. State Sen. Jim Davis, R-Macon County, said he wasn’t aware Jackson and Macon had been excluded.
“This last negotiation was done behind closed doors and toward the end,” said Wooten, a registered Democrat. “There was not a lot of public participation, and in fact, I think many legislators did not know about this until the actual budget bill was presented. We are working to try to get additional information, but we are finding that information is hard to come by.”
The attention being paid to sales tax comes as the General Assembly’s conservative leadership shifts the state away from relying on income-tax revenue. These state leaders believe sales taxes are more fair and less volatile than income taxes. As part of this broader plan, the pending sales-tax increase comes with a corresponding uptick in the standard deduction for personal income, as much as $500. And, beginning in 2017, the state tax rate will be reduced from 5.75 percent to 5.499 percent.
All but 11 Democrats voted against the state’s $21.74 billion budget, which will serve as North Carolina’s financial blueprint for the 2015-2016 fiscal year.
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