In 2007, the North Carolina General Assembly approved a local option sales tax for counties. Essentially, it allowed counties to impose an additional quarter-cent sales tax if it was approved by voters in a referendum.
In the ten years since the passage of that law, it’s remained quite popular with county commissioners. Since 2007, there have been 127 local option sales tax referenda. It’s been significantly less popular with taxpayers who are obliged to pay those additional taxes. Of those 127 referenda, only 31 have been successful – less than one in four. Not easily deterred, county commissioners have put sales tax questions on ballots multiple times, as allowed by law. That’s why there have been 127 referenda on ballots in 70 counties.
The worst offenders, in this regard, are Bladen and Harnett Counties. Bladen has held local option sales tax referenda five times – once in 2010, twice in 2014, and twice more in 2016 – without ever seeing it pass. Harnett held unsuccessful referenda in 2007, 2009, 2010, and 2012. In 2013, they seem to have finally worn down voters, who finally approved the tax in an off-year election with low turnout.
It’s not difficult to see why this tax appeals to county commissioners. Taxpayers, they reason, perceive a quarter-cent as trivial. The county will receive additional funds to spend, and voters barely even notice they’re paying it. Yet, voters have seen through that logic, which is one reason why they’ve repeatedly rejected these tax increase proposals. And voters seem to think counties are either taking quite enough revenue already or not spending it wisely.
Despite its record of failure, this session, House Bill 900 has been introduced to give cities and counties other, similar powers. This one would allow
- counties to impose a 1.5 percent sales taxes on prepared food,
- counties to impose up to a 6 percent occupancy tax, municipalities to impose up to a 3 percent property tax, or
- municipalities to impose a local sales tax of 0.25 percent.
Any of these would be used for public infrastructure or facilities, economic development, or both. Like the current local option sales taxes, each would be subject to referenda. And counties would only be allowed to levy one, not all, of these.
The title of HB 900 is telling. Bill sponsors call it the Safe Infrastructure & Low Property Tax Act. It sounds like the justification for the bill is to protect taxpayers by keeping property taxes low, but that’s disingenuous. Counties know that people are aware of tax rates generally, and property taxes specifically, and don’t like seeing them increase. For example, people buy houses outside city limits or across county lines to avoid higher tax rates. So, raising property taxes is politically more difficult than implementing any of these options. But raising taxes should be politically difficult.
Local government is held accountable when county commissioners are forced to answer difficult questions about whether they actually need additional revenue and how they’re spending what they already have. That helps to keep wasteful spending (and spenders) in check. The General Assembly should not be in the business of making it easier for local governments to increase the burden on local taxpayers.
And these sorts of taxes hit everyone’s pocketbook.
Prepared food taxes are paid by everyone who pops out of work on a lunch hour and buys a sandwich at the shop down the road, by parents trying to squeeze in some nuggets for their kids between school and soccer practice, and by small local businesses buying lunch for a client or hosting an event.
Occupancy taxes are paid by tourists, so they put every local hotel at a disadvantage relative to those across a county line who don’t have the tax. They’re also paid by small local businesses that bring in clients or prospective employees who have to be put up for a night. They’re paid by parents hosting a wedding. They’re paid by friends and relatives coming to visit.
And sales taxes are paid by everyone who buys anything subject to the tax. They’re paid by the rich and the poor, on luxury items and essentials. They’re paid day in and day out, a little bit at a time, and they add up to real money that’s taken out of the hands of local people and could otherwise be spent locally or invested to meet future expenses.
Given the history of similar initiatives, it seems clear that voters don’t want these sorts of additional taxes. And if they are implemented, because they hurt both taxpayers and businesses, they’re potentially harmful to the economy. Rather than proposing legislation that attempts to make it easier for local governments to raise taxes, legislators should be considering ways to lower taxes at the state level and reign in waste across governments at all levels.
