Back in the 1970’s, the legislature passed a local sales tax. The total sales tax – of one penny – was collected by Raleigh then distributed to the 100 counties based on where the goods were purchased.
Later, in 1983 and 1985, the legislature passed two one-half cent sales taxes. But, this time, the tax revenue was allocated based upon the population of each county, not by where the goods were purchased.
And for over 20 years that was our model. 50% of the sales taxes were returned to counties based on their population and 50% based on where goods were purchased.
Then, in 2007, the legislature changed the model. And local sales taxes were distributed 25% based on population and 75% based on point of sale. Obviously, that change favored commercial centers like Charlotte and Raleigh and left rural counties with less money to pay for schools, roads, and other needs.
Today, there is a debate underway to change the formula again.
Rural counties argue they do not have enough money to pay for schools and other essentials.
Urban areas argue they have to spend more to provide roads and infrastructure and police to support commercial centers – like shopping malls – that both urban and rural citizens use.
One earlier bill proposed to distribute 80% of the sales taxes based on population and 20% based on point of sale. Obviously, that reverses the current formula. And is a big change in favor of rural counties and a big drop in revenue for urban counties.
So, was it fair?
Would 20% (instead of 75%) cover urban counties unique infrastructure costs – which serve both urban and rural citizens?
As far as I can tell no one on either side has even attempted to answer that question. So no one knows what is fair.
That said, it’s hard to argue with returning to the 50-50 allocation we used for years. That will provide rural counties more money for their schools. And urban counties will still get a relative boost to help meet their unique infrastructure needs.
It’s not a perfect solution but, for now, it may be as close to fair as we can come.