Raleigh, N.C. — A major change proposed to how the state distributes local sales tax revenue is drawing criticism from urban counties.
Most sales tax revenue currently goes wherever consumers spend it, with the remainder doled out across the state. But Thursday, senators gave their final approval to a version of the budget that would reverse that formula and send more revenue to rural counties.
With a competing version of the budget already approved by the House, members of the two chambers will work over the next few weeks to hammer out the differences.
Supporters of the Senate plan, such as budget writer Sen. Harry Brown, R-Onslow, argue it's more fair to people who live in rural areas and drive to urban counties to shop, spending sales tax dollars needed back at home for roads and schools.
Critics like Sen. Joel Ford, D-Mecklenburg, disagree.
"This plan attempts to make weak counties strong by making strong counties weak," Ford said.
Budget data shows stark cuts for some
The Senate plan would implement new taxes to services and give local governments the option to increase sales tax rates. Senate leaders say that extra money will help soften the budget blow for urban areas.
But county leaders say that puts them in a tough spot: Sell a tax increase to the public or cut services.
Data released this week from the Office of State Budget and Management shows that, without sales tax increases – and without new sales taxes to services the Senate budget also plans for – several counties would face significant hits to their sales tax revenue over the next five years.
In New Hanover County, revenue would decrease almost 17 percent by the 2019-20 fiscal year without sales tax hikes, according to OSBM data.
"I think what they're calling it is tax fairness, but when it comes to New Hanover County, it's anything but," Mark Broyer, interim public affairs director for the county.
In the Triangle, Durham County would lose 12.4 percent of its sales tax revenue, and Wake County would lose 10.6 percent by 2020 when the plan is phased in, according to OSBM numbers.
Chris Dillon, Wake County intragovernmental relations manager, said the county's only real option to recoup that cost is to raise property taxes by about 3 cents per $100 valuation – or an additional $60 for a $200,000 home.
"The only thing we can cut to recoup that type of loss is education," Dillon said. "You can't nickel and dime a 10-percent cut. You have to go where there's big money."
Not all counties lose under plan
Yet, some counties would see a big boost.
Harnett County would get 47.1 percent more in sales tax money, Franklin County would jump 45.8 percent and Granville County would see 43.5 percent more.
Wake and several other counties oppose the Senate redistribution plan. Although they agree rural counties need more resources, they say the Senate's plan is the wrong way to do it.
"In the past, when help was offered to rural counties, all boats rose. It was not take from one and give to another," Dillon said. "This is a change in the statewide philosophy of how to grow North Carolina."
During debate, it also drew criticism from Democrats in the Senate.
"I'm quite surprised – as Republicans – that you would be involved in the redistribution of wealth," said Sen. Paul Lowe, D-Forsyth. "You're talking about a socialistic principle: Taking from somebody who has to give to somebody who doesn't."
But Sen. Tom Apodaca, R-Henderson, says a lot of that sales tax money is paid by shoppers from rural areas. The plan ensures that more of it goes home with them.
"The ones that dislike it the most are the ones that live in the big cities," Apodaca said. "The ones that live in the small counties that are struggling, we just go to the big cities and spend our money."
The measure has drawn criticism from Republicans in the House, which will be instrumental in finalizing a compromise budget.
Gov. Pat McCrory has also noted his disapproval, telling The Associated Press on Wednesday that local governments would be forced to raise property taxes to make up for losses.
"It would result in a hidden tax increase on millions of people in North Carolina, from the coast to the Piedmont and to the mountains," McCrory said.