One of the most controversial issues in North Carolina politics is how best to fund needed government programs at the local level. Dozens of counties have asked for taxing authority in addition to the property tax and other traditional sources. At the state level, lawmakers have debated funding inequity in public schools and the impact of population growth on the ability of localities to deliver services. More recently, both the governor’s office and legislators have considered reducing or eliminating state reimbursements for local taxes repealed during the 1980s, moves that cities and counties say could lead to additional tax inreases or service reductions.
All of these debates would benefit from more and better information. Citizens need to know how much they are paying in local taxes and fees so they can decide whether additional sources of funding are needed.
Using data on property taxes, sales taxes, and miscellaneous taxes and fees from the State Treasurer’s Annual Financial Information Report, we calculated county and municipal tax and fee burdens, 1) as a percentage of income (for counties) and 2) per capita (for counties and municipalities). We then constructed a set of rankings to more clearly view the cost of local government.
Although this analysis is by no means definitive, it moves citizens one step closer to grappling with this complicated issue.
North Carolina collected nearly $15 billion in state tax and fee revenues for fiscal year 1999-2000. This represented 7.2 percent of the personal income of the state’s citizens. In addition, local governments collected an additional $9 billion in property, sales, and other taxes and fees, representing another 4.3 percent of personal income. Combining the two yields an 11.5 percent state and local tax and fee burden. Federal collections raise the total tax burden on North Carolinians to approximately 33.4 percent of personal income, on average.
In 1999-2000 the median total property tax burden by county in North Carolina was 1.82 percent of income, or just over $400 per person. County rates ranged from 4.48 percent in Dare County ($1,101 per person) to 1.08 percent in Alexander County ($242 per person).
The median total local burden by county (including property, sales, and other taxes and fees) was about $878 per person in 2000, up nearly 2 percent in inflation-adjusted terms from $852 in 1999. As a percentage of income, the median burden by county was 3.99 percent, a 1.11 percent decrease from 1999. Counties ranged from a high of $2,738 (11.14 percent of income) in Dare County to a low of $565 in the per-person measure, in Alexander County, and 2.5 percent of the percentage of income measure, in Polk County.
It is important to note that incomes vary among counties, and this can affect the rankings. Counties of similar size and similar total tax collections can vary in their burden because of differences in per-capita incomes. Differences among counties can also reflect the rate and extent of annexation, which places more taxpayers onto municipal tax rolls. Additionally, our analysis excluded intergovernmental revenues, municipal electric and gas charges, bond-sale proceeds, and several other forms of revenue.
Finally, there is a wealth of detail, by county and by municipality, in the appendices accompanying this report. Though some data were not available, overall this report presents a fairly comprehensive picture of the cost of local government in North Carolina.