Counties, including Dare, that would be economically devastated by the state Senate’s plan to change the way the state distributes the local option sales tax stepped up their opposition this week with news conferences, web postings, and e-mail alerts.
As the week wore on, the Senate blinked, but it refused to totally ditch the redistribution plan.
On Wednesday, Senate leaders announced that they would more or less go along with opposition from the House and the governor and take some policy issues, including the sales tax plan, out of the budget.
This will make it easier for all factions — now very far apart in their visions — to pass the long overdue state budget.
However, proponents of the sales tax redistribution, led by Republican Sen. Harry Brown of Onslow County, took the plan and wrote it into the House’s economic development plan, NC Competes, which is House Bill 117.
The bill sailed through committee in the Senate by week’s end and is up for a final vote in the Senate on Monday.
If it passes the Senate, it will go back to the House, which has generally been resistant to redistribution.
Now the question is whether the House — and the governor who threatened to veto the budget if the sales tax plan was in it — will look more favorably on it as part of its economic development goals.
If it doesn’t, the bill would go to a conference committee of the two chambers.
Dare County leaders have fought tooth-and-nail to defeat the sales tax plan, and today they continued the fight with a plea for all Dare County citizens and those who own investment or retirement property here to contact state lawmakers and take a stand against HB 117.
Brown and other Senate leaders who support the redistribution say it is a more fair and equitable way to distribute the local option part of the state sales tax — which is 2 cents on the dollar.
It is now distributed 75 percent based on point of sale and 25 percent on population. This, Republican leaders say — hurts smaller and poorer rural counties and benefits larger counties that are commercial centers.
They proposed — first in a Senate bill and then in the chamber’s budget — to change the formula to 80 percent distribution based on population and 20 percent on point of sale.
The compromise that the Senate has inserted into the House bill would change the formula to a 50-50 split.
This is only slightly better news for Dare County. The plan still would inflict considerable financial damage on the county budget, starting next year.
According to the General Assembly’s fiscal research division, the first redistribution plan would have taken about $9 million from Dare County and additional money from its municipalities. The new 50-50 plan would take $4.6 million — 24 percent — from Dare and another 24 percent from the cities.
Furthermore, Dare County officials note that neither estimate from the General Assembly considers counties, such as Dare, where the sales tax growth occurs at a rate higher than the state average.
Either way, Dare County would see its share of the revenues cut more deeply than any other county in the state.
The General Assembly also proposes that, to make up for lost funds, counties can expand their sales tax base — add sales tax to more items and services that are now exempt, such as auto repairs and veterinary bills. If that happens, lost revenue would be only $4 million — 21 percent.
Taking $4 million or $4.6 million from Dare’s general fund budget of just over $100 million will be painful. The county will have to reduce service, raise property taxes, or do some combination of the two.
Redistribution of wealth is an admirable goal, though not one usually associated with Republicans. Most opponents of the sales tax plan recognize that smaller poorer counties need money for better schools and infrastructure.
However, they note that there are other ways to get more funding to counties that need it that do not involve taking it away from larger counties who also need the funding to pay for added services and infrastructure to support commerce.
Also, the Senate’s plan takes sales tax revenues not only from those large counties that we think of as hubs of business and commerce, such as Charlotte and Raleigh, but also counties, such as Dare, which have a small year-round population but a thriving tourism industry. Hosting about 300,000 additional people in the community in the summer requires more services, which cost more money.
The redistribution sounds really nice when you hear Brown talk about it.
?We simply believe that when someone spends their hard-earned tax dollars, those dollars should provide more benefit to their own family and their own community,? Brown said in a news release this week. ?The current system forces North Carolinians from 83 counties to subsidize a select few, and this compromise will help all parts of the state.?
However think of this another way.
Under the distribution plan, property taxes would probably increase to some degree to make up for the lost sales tax revenue.
Property owners who live in Dare County will be forced to spend their hard-earned tax dollars to provide services to tourists, most of whom don’t even live in this state. Meanwhile, most of the money that the visitors spend here will go to Raleigh to be shared with other counties.
There’s just no way that this is fair and equitable.
?The intended goal of the proposed change to help poorer, rural counties is noble, but the logic of this sales tax redistribution plan does not hold up under scrutiny,? Bob Woodard, Chairman of the Dare County Board of Commissioners, said today in a news release. ?The General Assembly must find a way to help the less prosperous areas of North Carolina without harming tourism-based and other income-producing areas of the state.?
County leaders are urging all county citizens and property owners to call or e-mail state legislators immediately to ask them to oppose HB 117 and the sales tax redistribution plan. Contact information is available at www.ncleg.net.
FOR MORE INFORMATION
Click here for the General Assembly’s fiscal research division’s chart of how the sales tax plan will affect each county.
For more information on the plan, how it works, and what proponents are saying, see these related articles:
Legislative update: Sales tax plan proposal scaled back, but still alive
Local leaders hammer away at sales tax plan
Raleigh takes aim at Dare County
