February 7, 2006

RALEIGH – North Carolinians are shouldering a heavier local-government tax burden, according to a new study by the Center for Local Innovation.

The average North Carolinian saw local taxes increase by 5.1 percent in Fiscal Year 2004 (July 2003 to June 2004). That is the latest year for which data is available. That growth rate is one of the many findings in CLI’s “By the Numbers 2006: What Government Costs in North Carolina Cities and Counties,” by CLI policy analyst Michael Lowrey.

This is the eighth “By the Numbers” report published by CLI, a special project of the John Locke Foundation. In preparing it, Lowrey 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. For counties, Lowrey also constructed rankings on a share-of-income basis.

Local government costs rose in most North Carolina counties from FY 2003 to FY 2004, the CLI report found. The median county’s local tax and fee burden equaled 4.6 percent of a typical North Carolinian’s income. That figure was nearly 7 percent higher than the rate for FY 2003, Lowrey said.

“Fiscal Year 2004 saw a significant increase in the local tax burden on North Carolinians,” Lowrey said. “And that increase came on the heels of the substantial increase of the previous year.”

“Regardless of your perspective, this report does show that the cost of local government is continuing to outpace inflation and population growth,” CLI director Chad Adams said. Noting that local spending is relative to services delivered, Adams said, “It’s important for folks to have a perspective on the value they receive from local taxes.”

“It’s also critical that taxpayers be able to see how other communities across the state stack up with respect to the cost of local government,” Adams said.

The report ranked the 26 North Carolina cities with populations of at least 25,000 people. Among those cities, Charlotte had the highest local-government tax burden, followed by Wilmington, Asheville, Durham, and Chapel Hill.

The lowest tax burdens in those cities were in Jacksonville, Thomasville, Goldsboro, Kannapolis, and Rocky Mount. The report also ranks the state’s other municipalities within three population groups.

Residents in the counties of Dare, Currituck, Mecklenburg, Brunswick, and New Hanover paid the highest amounts in taxes and fees to local government, the report found. The lowest burdens were imposed on residents in the counties of Alexander, Madison, Gates, Caswell, and Hoke.

The rankings provided by the report do not necessarily correspond to how well or poorly a county is governed, Adams said. “This report is a tool to help citizens observe spending, relative to other parts of the state.”

Decisions in Raleigh help explain the continued, large increases of local-government costs on North Carolinians, Adams said. “Officials in Raleigh have been willing to balance the state budget in Raleigh by putting new costs or taking away traditional revenue streams from local communities,” Adams said. For example, he said, “no other state in the nation requires local governments to support Medicaid like North Carolina.”

The Innovation Guide, “By the Numbers 2006: What Government Costs in North Carolina Cities and Counties,” is available on the Locke Foundation’s web site. For more information, please contact Chad Adams at (919) 828-3876 or [email protected]. To arrange an interview, you may also contact JLF communications director Mitch Kokai at (919) 306-8736 or [email protected].