Local sales tax cap comes back

House and Senate leaders have agreed on a retooled bid to limit urban counties' ability to raise sales taxes. That could leave Wake County voters with a tough decision this fall.

Posted Updated
North Carolina Sales Tax
Laura Leslie

House and Senate leaders have agreed on a retooled bid to limit urban counties' ability to raise sales taxes. That could leave Wake County voters with a tough decision this fall.

House Bill 1224 appeared to be dead for the session Thursday morning, but just before midnight Thursday, Senate leaders unveiled a revised version of the plan.

The original bill would have capped the maximum local sales tax in any county at 2.5 percent. While it would have given most counties more flexibility to raise sales taxes with voter approval, it would have restricted taxing power in four counties whose cap had already been set at 2.75 percent.

Wake, Mecklenburg, Guilford and Forsyth counties had already been granted authority to ask voters for a half-cent sales tax increase for transit needs, in addition to a quarter-cent for education or general use. Lowering the cap in those counties to 2.5 percent would limit their ability to raise money for both transit and education.

Under the new version of the bill, those four counties could keep their elevated cap – but only if voters there have agreed to a quarter-cent increase for general use by the end of 2014.

Mecklenburg and Guilford counties already have that quarter-cent sales tax proposal on the ballot this November, so they could qualify to keep their higher cap if voters pass the initiatives. Wake and Forsyth counties, however, do not.

Sen. Bob Rucho, R-Mecklenburg, said the change was made after leaders in the affected counties criticized the earlier plan.

"There were some concerns about some counties feeling they needed to have an opportunity to vote on the quarter-cent," Rucho said. "We thought it was a very fair way to achieve that opportunity if they choose to do that." 

But Sen. Dan Blue, D-Wake, was incredulous. 

"You are giving Wake County 90 days to put a proposition on the ballot as to whether it wants to tax its citizens at a quarter-cent for educational purposes?" Blue asked. 

"We were trying to give them an opportunity, as you were critical," Rucho responded. "You should be thrilled and happy that you achieved your goal."

"Don’t think you’re solving any of the problems you've caused Wake County by throwing this at us," Blue replied.  "I don’t know why you’re singling Wake County out for this kind of treatment."

Sen. Josh Stein, D-Wake, argued that campaigns for tax increases take time, money and planning to be successful.

"It is impossible in 90 days to start a referendum campaign. You are all but killing it for Wake County," Stein said.

Wake County commissioners have never formally considered a quarter-cent tax increase, although they are expected to discuss it at a meeting on Monday.  

Stein noted that Rucho's own county of Mecklenburg "is taken care of" by the change. 

"Once again, you are telling the voters of Wake County, 1 million strong, that you know better than we do what our priorities are," Stein said, "and you're wrong." 

The final version of House Bill 1224 also includes several grant programs for economic development, including the Job Catalyst Fund, a new grant fund sought by Commerce Secretary Sharon Decker, and legislation allowing crowd-funding of start-ups in North Carolina. 

Senate leaders also added several revenue law provisions to the bill from Senate Bill 763, an omnibus measure that failed to pass the House in time to be approved by the end of session.

However, two high-profile items were missing. The House voted Thursday in Senate Bill 763 to extend the state's film tax incentive program and historic preservation tax credit.  Those items were not included in the final version of House Bill 1224. 

The measure passed the Senate 32-11 shortly after midnight Friday. It will receive a final vote in the House Friday or Saturday.


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