The State and Local Fiscal Modernization Study Commission is comprised of legislators, local officials, members of the business community and economists. Established by the General Assembly in 2006, the Commission is charged with studying the State and local tax structure and sharing of revenues and responsibilities and making recommendations of needed changes to the Governor and the General Assembly.

After breaking into subcommittees and meeting throughout the fall and winter, the Commission met again today. to set priorities of their work thus far. Members voted and then tabulated the priorities based on the votes. One member commented that even the lower priority items are important.

Their next meeting is scheduled for April 30 at which time they will incorporate these priorities and begin to make recommendations to the Governor and General Assembly. Although their work is far from complete, a look at these priorities offers some insight into how North Carolina?s tax structure may be reformed.

In considering changes in Local and State Taxes, the commission considered the following fourteen ideas the most important:

Highest Priorities in order:
1. Broaden the sales tax base.
2. Reduce the top marginal income tax rate.
3. (tie) Broaden individual income tax base.
3. (tie) Give local government greater flexibility.
4. Reduce corporate income tax rate.
5. Reduce the number of individual income tax payers by eliminating the filing requirements for some.
6. Combined reporting.

Middle range priorities in order:
7. Eliminate differential rates in sales tax.
8. Reduce reliance on individual income tax.
9. Expand local options in property tax.

Lower range priorities in order:
10. Reduce reliance on the gas tax.
11. Replace excise tax with ad valorum tax, i.e. somehow the tax on cigarettes would not be by cigarette but by some other measure.
12. Repeal estate and gift tax.
13. Include privilege tax in sales and use tax.

Program responsibility priorities include:
1. State should assume the counties share of Medicaid (#1 on everyone?s list).
2. Greater flexibility for local governments by reducing and lifting mandates.
3. Toll roads and public/private partnerships.
4. Issue bonds for water and sewer infrastructure.
5. Local governments should have the flexibility to use Powell bill funds for state road construction projects.
6. (tie) Develop and implement wellness programs to control Medicaid costs.
6. (tie) Local government access user rates to cover both capital and operational costs to provide water and sewer infrastructure.
7. State funding responsibility for local election personnel.