An intriguing proposal to expand the taxing authority of North Carolina towns and cities has surfaced in the General Assembly. If the proposal makes it into law, it will be something of a reverse of recent legislative efforts to reduce local flexibility and control.
A bill sponsored by Rep. Stephen Ross, a Republican from Burlington, would give municipal governments the option to seek a quarter-cent sales tax to pay for infrastructure and economic development projects. The added tax would be similar to local-option sales taxes counties can collect. Six years ago, for example, Durham County voters approved a half-cent addition to the tax rate for transit and a quarter-cent increase for education, funds from that going to early childhood education, Durham Technical Community College and Durham Public Schools.
Three years ago, the state eliminated the privilege tax, a local business tax that netted about $3 million for Durham and larger sums for many cities. In recent sessions, the legislature has debated shifting the allocation of the sales tax the state levies to transfer more money collected in economically booming urban counties to more challenged smaller cites and rural areas.
Towns and cities have not historically had the authority to levy sales taxes, relying heavily on taxing real and personal property. While that source remains strong in Durham and the Triangle, as well as other prosperous regions such as Charlotte and resort areas in the mountains and on the coast, statewide the property tax has been under economic siege.
“It’s important to consider how many towns have suffered revenue losses in North Carolina, from declining home values, closing manufacturing plants, and the loss of revenue streams like privilege tax,” Ross said Wednesday as the House Finance Committee considered, and endorsed, House Bill 900.
Opposing tax increases has become an almost reflexive reaction among much of the public, although Durham voters have been supportive of tax increases tied to education and social programs such as affordable housing, for example. And many progressive politicians – notably the late Paul Luebke of Durham – have opposed expanding the sales tax because of its regressive nature, exacting a greater burden on people with lower incomes.
Still, broadening the portfolio of options open to local governments provides more flexibility to tailor the mix of taxes to local conditions and priorities. And the leaders of those governments are, of course, accountable to their voters for taxing and spending decisions. As the League of Municipalities noted in endorsing the bill, “a local tax structure that relies too heavily on one form of taxation can place an unfair burden on some residents.”
The fate of Ross’s bill in this soon-to-conclude legislative session is unclear, but it is an idea worthy of support.