RALEIGH — Local taxes and fees in Charlotte totaled more than $1,920 per resident in 2001, ranking North Carolina’s largest city No. 1 for local government costs among major cities for the second year in a row, according to a new report from the Center for Local Innovation. Hickory, Durham, Wilmington, Cary, and High Point rounded out the top six in combined costs per person out of 24 cities with at least 25,000 residents. Gastonia, Rocky Mount, Kannapolis, Burlington, Goldsboro, and Jacksonville ranked lowest in taxes and fees — although the presence of major military bases in the latter two cities was a major factor in reducing their apparent tax burdens.
By the Numbers 2003: What Government Costs in North Carolina Cities and Counties is the fourth such report published by the Center, a division of the John Locke Foundation. Policy analysts Michael Lowrey and Erik Root coauthored the study, which used the most recent data available from the State Treasurer, the Census Bureau, and the Bureau of Economic Analysis to construct rankings of local government cost on a per-person basis — as well as, for counties, a share-of-income basis.
Local government costs rose in most North Carolina counties from 2000 to 2001, the Center for Local Innovation report stated. In the median county, city and county taxes, fees, and charges consumed 4.04 percent of personal income in 2001, down slightly from the year before but still 8 percent higher than the 3.74 percent rate in FY 1993-94.
Among the 10 most populous counties, New Hanover (5.77 percent), Durham (5.72 percent), Mecklenburg (5.27 percent), and Guilford (4.86 percent) ranked relatively high in average cost of local government. Gaston (4.5 percent), Buncombe (4.28 percent), Cumberland (4.24 percent) Forsyth (4.08 percent), and Wake (4.05 percent) were in the middle of the pack, while Davidson (3 percent) ranked low.
The report showed that while local government costs declined slightly on average from 2000 to 2001 — to 4.29 percent of statewide personal income, from 4.36 percent in both 2000 and 1999 — the longer-term trend was of local governments consuming a growing share of household budgets in North Carolina. In 1994, for example, localities took 4.06 percent of income, on average. And local revenue collections in the median county grew from an inflation-adjusted $775 per person in 1994 to $904 in 2001 — a real increase of 17 percent.
“During the recent debate over local revenues and a local-option sales tax, some city and county officials claimed that their current sources of revenues were not adequate to keep up with growth,” Root observed. “But the long-term trend clearly shows that not only were localities collecting more taxes and fees, but their collections were outpacing population and income growth before the passage of the new local-option tax.”
On average, the report concluded, North Carolinians paid about a third of their income in taxes and other government charges in 2001 — 21.4 percent to the federal government and 11.4 percent to the state and local governments. Property taxes alone consumed nearly 2 percent of income, or just over $450 per person.
On a regional basis, high-tax counties were somewhat more likely to be found in Eastern North Carolina and in major urban centers, while low-tax jurisdictions were more common in the Piedmont and mountain regions. Fifteen of the 25 counties with the highest local government costs as a share of income were located in the Coastal Plain and Sandhills regions, while 16 of the 25 lowest-ranking counties were in the Piedmont or mountains.
The study’s authors were careful to note that a high tax-burden ranking in By the Numbers 2003 does not necessarily mean that a city or county is poorly governed.
“Whether a jurisdiction is ranked high or low in cost of government is not the end of the debate over fiscal policy — it is merely the beginning,” they wrote. “Citizens of North Carolina’s cities and counties must decide whether the services they receive are worth the price they and their fellow residential and business taxpayers are paying in local taxes and fees.”
For more information on By the Numbers 2003 or North Carolina fiscal policy, contact Erik Root at 919-828-3876 or visit http://www.JohnLocke.org . The full report is available online at