RALEIGH — Eight of North Carolina’s largest cities now have annual local tax-and-fee burdens topping $2,000 per person. Charlotte regains its No. 1 statewide ranking among the largest cities, with a local government bill of $2,379 per person. That’s according to a new John Locke Foundation report.
Meanwhile, the average North Carolinian paid 4.28 percent of his personal income to fund city and county government in the 2012 budget year, the latest year with available data. That figure is down slightly from 4.32 percent in 2011.
“The typical resident of the median county in North Carolina paid $1,277 in taxes and fees to county and municipal governments in the 2012 budget year,” said report author Michael Lowrey, a JLF Economics and Regulatory Policy Analyst. “That’s up from an inflation-adjusted figure of $1,267 in 2011. But the average North Carolinian actually pays more since many of the state’s more populous counties also have above-average local tax and fee burdens.”
A family of four in the median county would face an average tax-and-fee burden of $5,107. “That’s a significant burden, especially given the high levels of state and federal taxation, along with the still-elevated unemployment levels present in 2012,” Lowrey said.
Local government collected $15.7 billion in property, sales, and other taxes and fees during the budget year that stretched from July 2011 through June 2012, Lowrey reports. “Local government revenues increased by roughly $400 million in that budget year,” he said. “This is not to say that all revenue sources increased. Sales tax revenues grew by $150 million, or 7.5 percent, while property tax receipts increased by $250 million, or 3 percent. Water department revenues and other tax and fee income were essentially flat.”
Among North Carolina’s largest cities, Charlotte ($2,379 per person) jumped two spots to reclaim the No. 1 ranking for largest local government tax-and-fee burden. Before a one-year drop from the top spot, the Queen City had ranked No. 1 for a decade.
Mooresville dropped from the top spot to No. 2 in 2012, while Chapel Hill, Wilmington, and Monroe rounded out the top five. Along with those cities, Durham, Asheville, and Cornelius all had local tax-and-fee burdens of at least $2,000 per person.
Among the list of 35 ranked municipalities with at least 25,000 residents, Jacksonville ($1,241 per person), Thomasville, Indian Trail, Fayetteville, and Asheboro had the lowest local government tax-and-fee burdens.
Lowrey calculates the burden by adding all local taxes and fees collected in the city, then dividing by the total population. “That total includes both municipal and county taxes and fees, so a city’s ranking depends to some extent on the taxes and fees levied by the surrounding county,” he said.
Some commentators have questioned whether communities with higher sales-tax revenues ought to be labeled “high-tax communities” in the annual report. “Localities retain the discretion to determine their overall revenues by altering their property-tax rates and the other taxes and fees they collect,” Lowrey said. “Thus higher sales-tax revenues allow a community to lower it property-tax rates, provide more services, or both.”
Kill Devil Hills, Pineville, and Hillsborough had the highest local per-person tax burdens among the 88 ranked N.C. communities with populations between 5,000 and 24,999 people. The report ranks each of these communities, along with 188 municipalities with populations between 1,000 and 4,999 people. Even residents of 191 municipalities with populations of fewer than 1,000 people can see how their communities rank against their peers.
By The Numbers: What Government Costs in North Carolina Cities and Counties FY 2012 is the 16th such report published by the John Locke Foundation. Lowrey used the most recent data available from the State Treasurer, Bureau of Labor Statistics, and Bureau of Economic Analysis to construct rankings of local government cost on a per-person basis. For counties, he also constructed rankings on a share-of-income basis.
Lowrey highlights a continuing problem that helps skew the rankings. Hyde and Sampson counties and 44 municipalities missed state deadlines to file their State Treasurer’s Annual Financial Information Report.
“Whether those local governments filed the statements after the deadline or not, the information was not available from the treasurer’s office in time to be included in this report,” Lowrey explained. “Without those AFIR statements, By The Numbers cannot include local tax burdens for those communities. Complete reporting would result in a somewhat higher combined county-municipal median tax burden.”
Lowrey also repeated his annual warning against comparing the relatively high per-capita tax numbers in resort communities to those in other N.C. cities. Communities with larger numbers of second homes and resorts — combined with small year-round populations — will see larger per-capita tax burden figures, he said.
The latest report contains another warning. “The state treasurer’s office drastically reformulated how local government financial information is reported with data for the 2012 budget year,” Lowrey said. “It is thus possible that comparisons between this edition of By The Numbers and previous reports might be more difficult.”
Among the 10 most populous counties, Durham (5.66 percent), Mecklenburg (5.44 percent), Guilford (5.02 percent), New Hanover (4.84 percent), Forsyth (4.56 percent), Gaston (4.56 percent), Buncombe (4.52 percent), and Wake (4.44 percent) all ranked among the top 25 N.C. counties in average cost of local government. Union (4.04 percent) ranked near the middle of the pack. Cumberland (3.11 percent) ranked No. 83 of the 98 ranked counties.
North Carolina collected $21.9 billion in state tax and fee revenues from July 1, 2011, to June 30, 2012. That’s 6 percent of state residents’ personal income. Local governments collected an additional $15.7 billion in property, sales, and other taxes and fees. That’s another 4.3 percent of personal income.
“Combined, they represent a state and local tax and fee burden of 10.3 percent,” Lowrey said. “Federal collections raise the total tax burden on North Carolinians to approximately 26.8 percent of personal income, on average.”
Lowrey stresses that a high cost-of-government ranking in the By The Numbers report does not equal a judgment that a city or county is governed poorly.
“By The Numbers is a tool that represents factual data only, without editorial comment or bias,” Lowrey said. “The best way to compare your city or county to others is to find municipalities or counties of similar size and demographics.”
“This report helps taxpayers evaluate whether the services they receive from local government merit what they are paying for them,” he added. “We hope taxpayers will continue to ask about the proper role of local government and its relationship to the state. It’s important to keep these discussions alive and to ensure our local leaders remain accountable to taxpayers.”
The John Locke Foundation Policy Report, “By The Numbers: What Government Costs in North Carolina Cities and Counties FY 2012,” is available at the JLF website. For more information, please contact Michael Lowrey at (704) 569-4269 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].