Press Release

New JLF report shows statewide average local government tax burden remains at 4.5 percent

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Click here to view and here to listen to Dr. Michael Sanera discussing this report.

RALEIGH — The average North Carolinian surrendered more than 4.5 percent of his personal income to fund city and county government in the 2010 budget year, the same percentage paid in taxes and fees in 2009. That’s according to a new John Locke Foundation report.

The local tax and fee burden continued to top more than $2,000 a year in five of North Carolina’s largest cities.

“The typical resident of the median county in North Carolina paid $1,242 in taxes and fees to county and municipal governments in the 2010 budget year,” said report author Michael Lowrey, a JLF policy analyst in economics and regulatory policy. “That’s down from an inflation-adjusted $1,321 figure for 2009. But the numbers look different when you factor in the fact that many of the state’s more populous counties also have above-average local tax and fee burdens.”

Adjusting for population, the state average local government tax burden remains constant at 4.52 percent for a second straight year.

“The impact of the Great Recession was not felt equally throughout the state,” Lowrey said. “While income per person rose slightly in the median county, the state’s major urban areas saw sharp declines in personal income per person. Statewide, per capita personal income dropped $800 from 2008 to 2009. So the smaller dollar figure for the tax-and-fee burden did not translate into a smaller burden on a percentage basis.”

Local governments collected $14.8 billion in property, sales, and other taxes and fees during the budget year that stretched from July 2009 through June 2010. “That was essentially the same amount as local governments collected the prior year,” Lowrey said. “Sales tax revenues were down about $300 million, which was made up mainly by additional property tax receipts. This continues the pattern seen since the onset of the Great Recession, which has seen property tax receipts increase by over $1.25 billion per year while sales tax revenues dropped by some $700 million a year since the 2007 budget year.”

Among the state’s largest cities, Charlotte ($2,289 per person), Chapel Hill, Wilmington, Asheville, and Mooresville had the highest local government burdens. They topped the list of 34 ranked municipalities with at least 25,000 residents. Jacksonville ($1,116 per person), Thomasville, Indian Trail, Asheboro, and Goldsboro ranked lowest in local government burden among the larger cities. Lowrey calculates the burden by adding all local taxes and fees collected in the city, then dividing by the total population.

Three coastal communities — Kill Devil Hills, Carolina Beach, and Oak Island — had the highest local per-person tax burdens among the 89 ranked N.C. communities with populations between 5,000 and 24,999 people. The report ranks each of these communities, along with nearly 170 municipalities with populations between 1,000 and 4,999 people. Even residents of more than 200 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 2010 is the 14th 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 continues to highlight a growing problem that helps skew data. More than 50 communities missed state deadlines to file their State Treasurer’s Annual Financial Information Report.

“Hoke and Sampson counties and 53 municipalities missed the deadline to submit audited financial statements to the state,” Lowrey said. “Whether those local governments filed the statements after the deadline or not, the information still is not available from the treasurer’s office. Without those reports, 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.

Among the 10 most populous counties, Mecklenburg (5.77 percent), Durham (5.57 percent), Guilford (5.16 percent), New Hanover (5.01 percent), Forsyth (4.97 percent), Buncombe (4.79 percent), and Wake (4.74 percent) ranked among the top 25 N.C. counties in average cost of local government. Gaston (4.55 percent), Union (4.51 percent), and Cumberland (3.56 percent) ranked near the middle of the pack.

North Carolina collected $21 billion in state tax and fee revenues from July 1, 2009, to June 30, 2010. That’s 6.4 percent of state residents’ personal income. Local governments collected an additional $14.8 billion in property, sales, and other taxes and fees. That’s another 4.5 percent of personal income.

“Combined, they represent a state and local tax and fee burden of 10.9 percent,” Lowrey said. “Federal collections raise the total tax burden on North Carolinians to approximately 28.9 percent of personal income, on average.”

Taxpayers should consider the role their elected leaders play in setting tax and fee burdens, said Dr. Michael Sanera, JLF Director of Research and Local Government Studies. “Cities and counties often pay the costs of mandates from the state and federal governments, but many local governments also create their own fiscal problems through overspending.”

Lowrey and Sanera stress 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,” Sanera 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 2010,” is available at the JLF website. For more information, please contact Dr, Michael Sanera at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].

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About John Locke Foundation

We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

The John Locke Foundation is a 501(c)(3) research institute and is funded solely from voluntary contributions from individuals, corporations, and charitable foundations.