NC Senate Approves Bill That Would Redistribute Sales Tax Revenue

Aug 12, 2015

Credit Jorge Valencia

In a 34-12 vote, the North Carolina Senate approved a bill Tuesday that would expand economic incentives and redistribute local sales taxes to help more rural communities.

Republican leaders say the idea behind the sales tax proposal is to funnel more money into rural areas.

“It’s fairness,” Senate Majority Leader Harry Brown (R-Onlsow, Jones) said. “Somebody’s got to be fair to these counties and help.”

Currently, most sales taxes go to the county where the sale occurred. Brown’s original plan called for the state distributing 80 percent of the revenues evenly to counties based on population, and 20 percent based on the sale location.

After an outcry from House members and the Governor, leaders scaled back the plan so that 50 percent would be based on sale location, and 50 percent based on population. That formula was in place for 25 years before 2007.

Under this new plan, about 80 counties would bring in more revenue, while about 20 would see losses, according to the legislature’s non-partisan fiscal research staff. Wake County, for example, would lose 4 percent of its sales tax revenues, while Mecklenburg would lose about 5 percent.

Opponents of the measure argue that redistributing sales tax revenue would stifle growth, and “not just for rich counties,” argued  Senator Terry Van Duyn (D-Buncombe).

“Our cities are not are adversaries, they are partners in economic recovery, and they are our engines that are driving growth,” said Van Duyn, who points out that her county would take an 8-percent hit under the plan.

Proponents of the measure, which is part of a larger economic development bill, contend it will benefit the state as a whole.

“We should stop bickering about whose ox is being gored, and everyone is going to win,” said Senator Bill Rabon from Southport. “The total amount of sales tax revenue is this state is not changing. It’s going to be the same folks!”

The bill would also extend the Job Development Investment Grants—the state’s main way for attracting new jobs—for three more years in a way that favors poorer areas. Funding would increase from $15 million a year to $20 million.

Another provision would give expanded tax breaks for aviation gasoline and data center infrastructure.

The bill now heads to the House, where it’ll likely receive less support than it did in the Senate. Governor Pat McCrory has already said that he'll veto the measure.