Mooresville writer John Deem has a rock-anthem-inspired take this morning on the proposals in the General Assembly to shift sales tax revenues from urban to rural areas of the state:

Sales tax redistribution: Money for nothing and your trips for free

By John Deem

Nearly all of the debate over Republican legislators’ proposals for redistributing sales taxes has focused on fairness.

Is “point of sale” distribution unfair to rural counties whose residents spend money in urban areas but whose communities get none of the local sales tax collected on those purchases?

Is the notion of suddenly shifting millions of dollars in revenue unfair to the urban areas that must cut services, raise taxes, or both, to make up for unexpected shortfalls?

As is often the case when politicians create a solution then look for a problem, the local sales tax fairness doctrine misses the point completely.

Rural residents travel to urban areas to spend money because that’s where the businesses are. Those businesses are in urban areas because that’s where the people are. Lots of them.

It costs money to build and maintain roads, water and sewer systems, and other infrastructure to accommodate not just residents, but also the throngs of workers, shoppers, sports fans and others outsiders drawn to an urban area’s employers, stores and attractions. So does providing adequate levels of police, fire and emergency medical services not just for the local citizenry, but for the visitors taking advantage of everything the big city has to offer (and that their own communities do not).

Local governments in urban areas outspend rural communities on a per capita basis not because they can, but because they have no choice. Large populations create unique challenges that can’t be addressed through “equal” funding, which can be a puzzling concept for some elected officials who rest on the simplicity of ideology rather than the complexity of reality.

The fact is, residents of rural communities already get the best of both worlds. They have access to urban amenities, usually within a reasonable drive, but have to deal with few, if any, of the challenges urban communities must wrangle with every day. Meeting those urban challenges costs money – money rural communities don’t have to spend and, therefore, should not siphon from their big city neighbors.

That’s only fair.

"Healthywealthy" by Licensed under Fair use of copyrighted material in the context of Healthy, Wealthy and Dumb via Wikipedia -

“Healthywealthy” by Licensed under Fair use of copyrighted material in the context of Healthy, Wealthy and Dumb via Wikipedia

No, this post is not an attempt to personally disparage the folks running North Carolina government. Rather it is an attempt to conjure up an image that captures the impact of the decisions that state leaders have been inflicting of late on their brethren and sistren at the local level.

As some readers will recall, The Three Stooges were an outlandish and slapstick comedy trio that had a long run in the middle part of the last century. In one of the trio’s recurring bits, one Stooge (usually Moe – pictured on the left) would slap or punch the second Stooge, who would then, in turn punch the third member of the group. The third and most hapless Stooge would then turn beside him and find that he only had thin air to punch.

Sadly, this comedy bit pretty well captures the essence of what’s going on in North Carolina government right now: Whether it’s the McCrory-Pope team or the General Assembly that starts the punching, the ones left flailing at thin air are local governments.

For the latest classic example, check out the bill under consideration in the state Senate during the waning days of the 2014 session that would hamstring local governments in their ability to raise local sales taxes for important needs. While Senators sought to alter some of the the impacts of the bill last evening, it still promises to have a deleterious impact — especially on big counties like Wake and Mecklenburg. And, of course, this comes on the heels of several previous haymakers in which state leaders have slashed state support for locals.

The bottom line is that the overarching policy of the current conservative state leadership when it comes to local government is this: We’re all for local control that’s closest to the voters — except when we’re not (i.e. any time anyone at the local level even thinks about doing something — like raising taxes to provide essential public services — with which we disagree). SLAP!!!


ICYMI, the editorial page of the Greensboro News & Record pulled no punches this weekend in an editorial excoriating state senators for their last minute proposal to hamstring local governments when it comes to use of the sales tax for public services and structures at the local level. Here’s an excerpt from “Oddest idea yet”:

Republican state senators canceled a floor vote on a confusing sales-tax bill Thursday until they could get their stories straight. Which means it might not return.

Of all the heavy-handed directives the legislature has pushed down on local governments in the past couple of years — airport and water system takeovers, de-annexations, local redistrictings, elimination of privilege licenses — this one might be the most illogical.

The measure, which originated in the Senate Finance Committee without notice Wednesday, was presented as a means of giving counties additional tax flexibility. With voters’ approval, they could add to the local sales tax, designating revenue to schools or transportation projects.

But the strings attached tied everything in knots.

The legislation put restrictions on how new revenue could be spent — for education or for transportation, but not for both. It put a cap on the local sales-tax rate. And, perhaps most baffling, it required that if a county raised the sales-tax rate, it would have to raise it all the way to the cap….

The half-baked sales-tax bill, which also includes unrelated provisions boosting economic development efforts, was yanked from the calendar before the Senate adjourned for the weekend. Senators will return to Raleigh Monday, but the wacky sales-tax proposals ought to vanish as quickly as they appeared.

For more information on the proposal in question, click here for succinct summary.

NC Budget and Tax Center

A major detail has been ignored in the rush to adopt a flat income tax rate. With a flat income tax, revenues will grow more slowly over time, leaving North Carolina unable to maintain its most important investments, such as education, which has already suffered from significant spending reductions in recent years. That means we will have to raise other taxes to make up the difference or suffer the consequences of underfunding our priorities.

In the presentation to House Finance of the bill, Representative Lewis stated that the income changes–including most significantly the adoption of a flat tax–would hold revenue growth to about 4.5 percent per year. If revenue had grown that slowly over the past 20 years, North Carolina would have been unable to make  many of its most important investments. In 2007, for instance, North Carolina would have had nearly $5 billion less for North Carolina’s schools, colleges and universities, roads, public safety, and other services. That $5 billion is more than our budget combined for the Department of Health and Human Services, Department of Commerce, Department of Justice, Indigent Defense Services PLUS funds to address the NC pre-K waiting list and half of the child care subsidy waiting list. Read More

NC Budget and Tax Center

The House is taking a vote on the tax plan that was rushed through committees this week with little time for discussion of the real impact. This new House plan, like all the other plans proposed, will undermine North Carolina’s future by shifting taxes from the wealthy onto everyone else and will leave the state unable to make its most important investments.

Our full analysis of what this will mean for taxpayers can be accessed here. What does this tell us about the vote that House members are moments away from taking?

  • The top five percent will get tax cuts while the bottom 95 percent of taxpayers see their taxes increase, on average. This analysis is the most reliable way to assess what will happen to the population overall under this plan. It doesn’t cherry pick taxpayers with certain filing characteristics but summarizes the diversity of experiences under the House tax plan to tell us what the impact will be for a taxpayer on average in each income group.
  • The largest benefits of this plan overwhelmingly go to the top one percent. Millionaires would receive a tax cut of nearly $9,000. In fact, the small number of millionaires in this state would receive almost 40 percent of the total income tax cut that results from flattening the rate and removing the cap on charitable contributions.
  • The so-called “protections” for low- and middle-income taxpayers are ineffective and poorly targeted at those who are hurt by this tax plan. It will fail to shield those taxpayers from changing sales tax to services. The House tax plan combined with the end of the state’s Earned Income Tax Credit will raise taxes for taxpayers with an average income of $12,000 by 0.7 percent, while cutting taxes for taxpayers with an average income of $940,000 by -1 percent.
  • The House tax plan will cost the state $1.6 billion over five years. That means fewer dollars to invest in the foundations for economic growth—like K-12 and higher education—at a time when spending is already at historic lows.

Tax cuts for the wealthy paired with tax hikes for everyone else will not help North Carolina’s economy. But it will cost us our most important priorities.