Revenue Distribution (From The Insider 11/18/2014)

Changes could be ahead for North Carolina's method of distributing sales tax revenue as the Republican-led legislature rolls on with tax reform. Sen. Bob Rucho, R-Mecklenburg, says lawmakers are eyeing ideas that would potentially pull away from the status quo, a system that shines more on urban shopping destinations and less on low-income, rural areas. "We're exploring a lot of possibilities," Rucho said Wednesday, a day before he made similar comments to attendees of the N.C. Chamber's 2014 Tax Conference in Concord. According to a writeup from the N.C. League of Municipalities about the event, Rucho said the state's quest for economic health requires opportunity for all 100 counties, and that changes in sales tax revenue distribution may be a piece of the solution. 

One on a list of many possibilities is a shift to per capita as the dominant formula for distributing sales tax revenue to counties, which would get away from the current point-of-sale emphasis that generally shines more on urban retail cores. Point-of-sale is also valuable to tourism-heavy counties, like New Hanover. With summer-crowded beach towns and historic Wilmington in its limits -- noted also for its movie and TV show filming history -- New Hanover County has been a magnet for out-of-towners' dollars. It's also surrounded by rural counties, so it draws their residents in for shopping. According to a Nov. 13 post by Moore & Van Allen Public Affairs Counsel Canaan Huie on the firm's website, New Hanover and nine other counties would see a 25 percent larger allocation under a pure point-of-sale method, his numbers sourced from a 2012 Department of Revenue report. "On the other hand," Huie wrote, "in 60 counties the county allocation would be at least 25 percent more under a pure per capita basis." 

Asked about a possible per capita shift, Rucho said: "If one were to look at per capita, the small and the poor do benefit from it. That's compared to the present system. That's compared to ad valorem…." But options are numerous, he continued. "We're trying to explore all the avenues and hopefully come up with a plan by '15 so we can try to fix some of the issues that are before us." Sen. Bill Rabon, R-Brunswick, who co-chairs the Senate Finance Committee with Rucho, said the discussion isn't on an official track yet and is only at a research stage. "Any time we do anything, we want it to be revenue neutral and we want to keep everyone whole," said Rabon. "And that's a heck of a task." With winners and losers possible in revenue sharing adjustments, pertinent groups in North Carolina are waiting for the conversation to evolve as the 2015 legislative session nears. N.C. Association of County Commissioners spokesman Todd McGee said last week his group was following the talk of different formulas but couldn't support the general concept. "We have existing policy," said McGee. "We would oppose any redistribution of existing revenues, and that would certainly fall under that." 

League of Municipalities spokesman Scott Mooneyham noted that no specific proposals have crossed his desk. "But obviously any time you are talking about shifts in sales tax distributions, the implications for communities across the state are huge," he said. Tony McEwen, Wilmington's legislative affairs officer, said the city's finance department is on guard for what may come. "Any potential negative impact to local government revenue is cause for concern in light of the recent elimination of privilege license tax authority and the impact that had on municipal budgets," he said. Formula changes would ideally work in concert with the 2013 package of tax law changes that the state's Republican legislature implemented, reducing income taxes and relying on a broadened sales tax base for revenue. Julie White, executive director of the N.C. Metropolitan Mayors Coalition, said she'd like to see an economic development strategy that doesn't pit urban areas against rural. "We believe that our whole state can be successful by investing in strong infrastructure, linking regional economies and expanding opportunities in all parts of the state." (Benjamin Brown, THE INSIDER, 11/18/14)

AuthorDavid Crawford