Proponents of a plan to redistribute sales tax proceeds from urban to rural counties have been having a tough time rounding up the votes to get the proposal through the N.C. House.
Republican lawmakers from large urban counties such as Mecklenburg, which initially stood to lose up to $200 million over the next four years, have broken ranks with their GOP colleagues and are fighting them to a standstill.
The family feud centers on the way the state distributes sales tax money. Currently, a quarter of local sales tax is distributed statewide and three-quarters is kept where it is generated. That benefits retail-heavy urban areas.
Sen. Harry Brown originally wanted to change that so that 80 percent would be distributed statewide and just 20 percent would stay at the point of sale. The Jacksonville Republican believes that will help struggling rural counties around the state.
But since urban lawmakers balked at that, Brown and others recently rolled out a compromise: 50 percent would be distributed statewide, 50 percent would stay at the point of sale.
But even under that formula, Charlotte and the other large urban areas generating most of the state’s economic growth would still take a heavy hit. Charlotte would lose about $20 million over the next four years, while Mecklenburg County would lose about $65 million.
Given our surging growth rate, that would surely mean stiff local property tax increases to pay for schools and other vital public services.
And while the 50-50 split might sound fair, the Senate’s plan fails to account for the fact that the 75-25 split was the result of a 2007 compromise in which the state took the responsibility of Medicaid funding from the counties.
Rural counties, whose biggest budget expense was Medicare and Medicaid, benefited the most. So leaders agreed to give urban counties a heftier sales tax slice to help with their biggest expense – schools.
The Senate’s 50-50 compromise awaits action in the House, where opponents say they have the votes to defeat it.
That seems the appropriate result for this ham-handed attempt to help struggling rural counties. But that shouldn’t be the end of the discussion about offering economic uplift to our neediest regions.
Lawmakers should immediately propose new legislation setting up a grant program to build schools, retrain workers and seed economic development efforts in the poorest rural counties.
It’s not as if we can’t afford it. Despite tax cuts that helped top earners and squeezed the working class, we have a $400 million-plus budget surplus.
Why not just ease the cuts a bit and aim that money at struggling areas?
It would be a much more sensible response to the very real needs in rural counties.