Senate Tax Redistribution Plan Could Cost Mecklenburg County $50 Million a Year in Revenue

As members of the House and Senate meet behind closed doors next month to negotiate a state budget, a number of contentious issues will be on the table for debate, including funding of the JDIG job incentives program, a cap on the standard deduction, and an expansion of the sales tax on services.

But it’s the proposal for redistribution of locally collected sales tax dollars that’s causing the most heartburn for Mecklenburg and other urban counties. The current formula sends 75% of sales taxes back to the county where they were collected, and redistributes the remaining 25% statewide on a per-capita basis. Under the Senate’s proposal, that formula would gradually shift over the next four years to one that redistributes a whopping 80% of locally collected sales taxes statewide, on a per-capita basis.

That would mean Mecklenburg County stands to lose as much as $213 million over the next four years, based on revenue projections by the County Manager’s office. A loss of that magnitude would likely necessitate a property tax increase of as much as 5 to 7 percent.

Other fast-growing North Carolina counties will see similar revenue impacts, as well. Should the redistribution plan be fully implemented in FY 2019, as proposed, Guilford County would see a loss of $6.7 million, Durham County would lose $9.7 million, and Wake County would experience a staggering $17.7 million reduction in sales tax revenue.

North Carolina’s metropolitan counties rely heavily on sales tax revenue to fund the roads, sidewalks, and public safety required to support retail, office and industrial development. Losing significant portions of this revenue would likely result in higher local property taxes, reduced public services, or a combination of both.

Mecklenburg County’s delegation to the General Assembly is unanimously opposed to the plan, as is Governor Pat McCrory, who has likened the proposal to “class warfare.” But House and Senate budget conferees have yet to meet (officially, anyway), and the Redistribution proposal is one of a number of major items that need to be negotiated before a Continuing Resolution expires on August 14th. Medicare reform, JDIG funding, and cuts to the personal and corporate tax rates are also on the table, and must be resolved before the two chambers can approve a final budget for the fiscal year that already started July 1st.

The North Carolina Chapters of NAIOP have issued letters to the Senate and House to express our opposition over the sales tax redistribution plan.

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