Politics & Government

Senate sales tax proposal could cost Mecklenburg residents millions

North Carolina Senate leader Phil Berger (left) and House Speaker Tim Moore
North Carolina Senate leader Phil Berger (left) and House Speaker Tim Moore cliddy@newsobserver.com

Mecklenburg County lawmakers say taxpayers could be hit hard by a Senate proposal to shift millions in sales tax revenue from urban to rural counties.

A legislative report says Mecklenburg County eventually would lose $12 million a year under the plan. The city of Charlotte would lose nearly $5 million, and the county’s small towns also would see less revenue.

Some estimates apparently call for even steeper losses. “This is unequivocally bad news for Mecklenburg County as well as every other rapidly growing county in the state,” Democratic Sen. Jeff Jackson of Charlotte told the Observer.

Senate leaders unveiled the proposal as part of a broad rewrite of a House economic development bill. The sales tax provision is the latest variation of a proposal designed to boost the revenues of North Carolina’s rural counties at the expense of its urban counties. Gov. Pat McCrory called that proposal “class warfare.”

Today, sales tax revenues mostly are distributed based on where purchases are made. That benefits tourist destinations and cities such as Charlotte.

In March, Senate Majority Leader Harry Brown of Onslow County introduced a plan to redistribute those revenues on a per-capita basis to benefit rural areas. Under that plan, Mecklenburg County stood to lose nearly $68 million a year.

Under this week’s version, the state would distribute 20 percent of revenues based on where sales occur and 80 percent based on each county’s population.

“No one in (the Mecklenburg delegation) that I know of will support it,” said Republican Sen. Jeff Tarte of Cornelius.

The Senate bill also includes provisions to widen the sales tax base to cover services such as advertising, veterinary and pet care as well as repairs and maintenance work on personal property such as cars. Large nonprofits, such as hospitals, would lose a sales tax exemption.

Collectively, the changes are expected to create $171.3 million each year in new revenue.

The bill that includes the sales tax provisions still has to go through votes in committees and the full Senate, and then be reconciled with a House version. Sen. Bob Rucho, a Matthews Republican and architect of the sales tax widening, said he’s working to minimize the damage for Mecklenburg.

“I want to do everything I can to make sure Mecklenburg County is not harmed by this change in the law,” he said.

Democratic Sen. Joel Ford of Charlotte said the loss would be another blow from a legislature that last session eliminated the business license tax, a move that cost the city of Charlotte $18 million. City officials recently raised property taxes and fees as a result.

“This is a major financial blow to the city of Charlotte, and residents are going to have to bear the cost,” Ford said. “I’m afraid a property tax (hike) is going to be in our future unless we find a solution.”

The hit to Mecklenburg County could be as much as $62 million over five years, potentially requiring a 51/2-cent property tax rate increase “just to pick up the $62 million,” County Manager Dena Diorio said.

“It will hurt the county. That’s money that we need to meet the needs of our county,” Diorio said. “We really don’t think this is the answer the solve the problem in the rural counties.

“I think you need to have regional economic strategies that create jobs. Redistributing revenue from one county to another doesn’t create jobs.”

Mecklenburg County Commission Chairman Trevor Fuller said he understands some rural counties are struggling, but taking sales tax revenues from urban counties is not a solution.

“We’ve got to solve that problem, and I believe that urban counties ought to be a part of the solution,” Fuller said.

For weeks, he has pushed an idea – that has been tried before – of dividing the state into regional districts with larger cities as “the epicenter.”

“If we truly think of ourselves as a region, then when you talk about issue such as transportation, you talk about it regionally,” Fuller said. “You create an infrastructure that could be the beginning of investments being made in the rural counties that surround the urban county.”

Colin Campbell contributed.

Morrill: 704-358-5059

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