Amidst all the posturing in the debate in Raleigh over how to divide sales taxes between counties, I keep hoping to hear the answer to one question: What’s the right thing to do?
Here’s how our current ‘sales tax distribution system’ works: Let’s say a customer pays $10 in sales taxes. All $10 goes to the state, which keeps $6.90. Of the remaining $3.10, $2.33 goes back to the county where the sale occurred, and the other 78 cents is divided among all counties based on their population.
The General Assembly is debating how to change the way the $3.10 – that is divided between NC’s 100 counties – is allocated.
The problem is simple: When we allocate 75% of the $3.10 by point of sale, it favors urban centers like Charlotte and Raleigh. They get a lion’s share of the money. And, over time, that’s left other counties between a financial rock and a hard-place. When their residents drive to, say, Raleigh to shop, local dollars not only leave their economy, the sales taxes they pay in Raleigh stay in Wake County – instead of returning to their home county.
That has left many counties struggling, needing money for schools, with little choice but to raise property taxes. In many counties, property taxes have now hit the roof – which has left them struggling to compete with their more fortunate, urban neighbors.
That’s why the General Assembly is debating how to change the ‘sales tax distribution’ formula.
The battle lines were quickly drawn.
Of course, large urban counties who will lose funding don’t like the new plan – they argue shopping malls cost them money for infrastructure so they deserve more of the sales tax money. There’s some truth in that. But it’s also true the formula heavily favors urban counties.
Folks on the other side argue the system is unfair and broken and no money – at all – should be allocated based on point of sale. Every penny their residents pay in sales taxes should be returned to their counties.
The fact is the current formula for distributing sales tax distribution isn’t fair. But it is also a fact that there are some costs associated with being a regional shopping destination. Those two facts have to be weighed and balanced. And that’s what’s missing in this debate.
Swinging the pendulum too far one way or the other will simply create more unfairness. There is usually a point between too little and too much. We need to find it.