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Among numerous other dramatic and heretofore unpublicized changes, the Senate unveiled another version of its plan to shift sales tax revenues away from urban counties toward poorer rural counties this morning. And while parties can legitimately debate the wisdom of various sales tax apportionment methods, the underlying premise of the legislation — that adequate tax revenues are essential for communities to fund education and other public structures that are central to economic health and development — runs directly counter to everything else the conservative legislative majority preaches.

On virtually every other day, government is the enemy and the beast that needs to be starved. Somehow, however, when it comes to sales tax revenue, all of a sudden government is essential for community health.If you doubt this, listen to Senator Harry Brown preach about the inability of counties like his (Onslow) to offer teacher salary supplements and build new schools.

Earth to Senator Brown: There are lots of ways to get after the problem of inadequately funded public structures and services…like, for instance, not wrecking the state income tax.

The bottom line: It would be nice if these guys would get their story straight.  While their rhetoric this morning on the importance of public investments is welcome, the hypocrisy it evidences with respect to just about everything else they do and say is stunning.

Commentary

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.

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"Healthywealthy" by threestooges.net. Licensed under Fair use of copyrighted material in the context of Healthy, Wealthy and Dumb via Wikipedia - http://en.wikipedia.org/wiki/File:Healthywealthy.jpg#mediaviewer/File:Healthywealthy.jpg

“Healthywealthy” by threestooges.net. 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!!!

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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