Here's the lesson the N.C. Senate taught local governments last week: Don't make a deal with the General Assembly. If it involves an unpopular law, the Senate may renege on the deal and pull the rug from under local governments.
Fortunately, the state House may be less willing to flee before the wrath of the real estate lobby. The House shows little interest in double-crossing counties that accepted in good faith last year on a complex deal involving paying for the non-federal share of the Medicaid program.
Medicaid costs had risen so swiftly in recent years that many counties found it all but impossible to pay their share of the costs. Legislative leaders agreed to lift that burden, but to help pay the state's new costs, lawmakers took away from counties a half-cent of sales tax that went to local governments. In return, lawmakers gave counties two ways to make up for the loss of sales taxes: With the approval of county voters, they could impose either a transfer tax on real estate sales or an additional 1/4 cent sales tax.
To no one's surprise, the transfer tax has been unpopular. Voters have rejected it in 20 counties; in a couple of others, the sales tax increase has been approved. Real estate interests have financed local campaigns against transfer tax proposals, and have now persuaded senators that the tax ought to be eliminated as an option in all counties, including the 80 that haven't considered it. Last week the Senate passed legislation to do that.
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is needed to meet local services.
That's an act of sheer arrogance. It presumes that lawmakers know better than local voters what the best choice is. And it ignores the fact that the law is working just fine. In the counties where it has been proposed, voters have exercised their right to say no. Perhaps in the future they'll decide differently if counties make a case they need more revenue. Or perhaps voters in most or all counties will continue to reject the transfer tax. That's democracy.
Eliminating the option does more than undermine local governments. It also deprives counties of a tool meant to help make up for the loss of the half-cent sales tax. If the legislature wants to kill the transfer tax, it should give back to counties the sale tax revenue it took away – or provide some other way for counties to raise adequate revenue to meet local needs. Any other course is utterly irresponsible.