What’s Right?

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.

One Response

  1. Ryan Mayberry-Alexander County Commissioner says:

    I would not want to be in your shoes trying to walk the tightrope between Alexander and Catawba counties. As for sales tax revenues, in Alexander County, ours has been devastated over the last few years with the changes made, and it has prompted us to raise property taxes twice in the last 5 years. With revaluation affecting us this coming budget year, we will have a 3.5% drop in property tax revenues, making another property tax increase inevitable. We fight tooth and nail to keep the manufacturing and retail businesses that we currently have and with the way the state and municipalities dole out tax incentives, it makes it almost impossible for a rural county like us to recruit new business to Alexander County.
    There are costs associated with having a regional retail center. But that also brings in more revenues in the form of property tax. There is also a larger population of people in these retail areas, and these people buy homes, shop at local retail businesses, and spend their money locally in the regional retail centers. If all sales tax was distributed on a per capita basis, the regional retail centers still would have the benefit of a greater population, more jobs created in their areas, more construction in their areas, and the likelihood that manufacturers will relocate to their areas. Poor counties in NC are getting older and losing many of the brightest residents due to the trend of younger, more educated people moving to the more urban areas because most new jobs are created there. Poor and rural counties in NC will continue to have raise property taxes on the older and poorer residents to maintain basic services. Thank You, Ryan Mayberry

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