Senate Plan: Redistribute Cities' Sales Tax Revenue in Rural Counties

Mar 24, 2015

Powerful members of the North Carolina Senate say they want to revamp how the state distributes sales taxes revenue to better favor economically struggling rural areas.

Local sales tax revenue would be distributed to counties across the state based on their population. Currently, 75 percent of local sales taxes stay in the county where they’re collected, and the remaining 25 percent is distributed statewide based on population.
 

Credit MIKI Yoshito via Flickr

The proposed shift is the latest movement in powerful Senators’ efforts to transfer taxpayer money from the state’s urban centers—primarily the Mecklenburg and Triangle regions—to rural areas with declining populations.

The argument presented by Republican Senate Majority Leader Harry Brown, from rural Onslow county, argument: People from sparse areas travel to spend money at shopping centers in populous areas, and their money stays there.

"This tries to move the needle back to something that's fair for those poor and low-wealth counties," Brown said.

The plan would redistribute revenue from the 2 percent local portion of sales taxes, would not affect revenue from the 4.75 percent state portion of the tax, and would be phased in over three years.

Eight counties would lose sales tax revenue, according to an analysis provided by Brown’s office. Dare County, a primarily rural destination for visitors of the Outer Banks, would lose $9.8 million and mostly urban Mecklenburg County would lose $14.3 million. Revenue in mostly urban and rapidly-growing Wake County would stay roughly flat.

Revenue would increase by more than $10 million in five counties, according to the calculations: Harnett, Johnston, Randolph, Robeson and Union counties.

In response to the proposal, the North Carolina League of Municipalities pointed out that some rural coastal counties, including Currituck and Dare along the banks, would lose millions in revenue.

"Municipalities need solutions that do not create winners and losers," League spokesman Scott Mooneyham said.