John Locke Update / Research Brief

Six counties seek higher sales taxes

posted on in Fiscal Insight, Spending & Taxes
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After we posted a summary last week on sales tax referenda in four counties (Chatham, Forsyth, Madison, and Wayne), a citizen in Alamance County alerted us that a sales tax hike is on the ballot there, too. We scoured the internet and found that Stokes County has one as well.

Only two of 25 tax votes have passed when held in conjunction with presidential primaries, with an average 64% of voters rejecting tax hikes. Sales taxes have been more likely to pass in low turnout elections, so state law now requires a referendum can only go before voters when all precincts in a county are open.

Early voting has already begun in the March 3 primary election, and six counties have put a quarter-cent sales tax on the ballot. Voters across the state have learned the hard lesson from Buncombe County and other places where funds have been diverted from their promised use: every political promise has an expiration date.

Alamance County, north of Chatham, is making its fourth attempt to raise the sales tax, and commissioners have indicated they would repeal a portion of the 8-cent property tax increase they passed last year to pay for school and community college bonds. The attempt by Stokes County, north of Forsyth, follows a 2016 rejection from voters. A brochure indicates the money “may” be used for school safety improvements.

Alamance County

Alamance County commissioners suggested they might use the money to increase education spending in a number of ways before settling on a plan to dedicate the sales tax money to debt service and repeal up to half of the 8-cent property tax increase Commissioners passed last year.

The Times-News reported that voters approved borrowing $189.6 million in 2018 for school and community college construction, but voters did not approve a quarter-cent sales tax hike to pay for it. Commissioners then approved an 8-cent property tax hike in June 2019. Before 2018, county commissioners tried twice before, in 2010 and 2012, to convince voters to approve a sales tax increase.

Alamance County’s property tax rate jumped 13.6 percent this year to 67 cents. It generates $1.4 million per penny of tax for total property tax revenue of $97 million. The $6 million sales tax hike is equivalent to a 4.3-cent property tax increase, which means Alamance would have a net tax increase even if commissioners followed through on their proposed 4-cent cut in the property tax rate.

Stokes County

Commissioners in Stokes County at least have waited longer since their last request for a sales tax hike in November 2016. A brochure from the county says only that the new revenue “may” pay for school safety “or a service-oriented entity,” suggesting that there is no definite plan. “If the sales tax referendum is defeated,” however, “the [unspecified] school facilities and other improvements that would have been paid for with this sales tax revenue will instead have to be paid for with other local funds – primarily property taxes.”

According to the county’s brochure, “The State’s estimate for Stokes County is estimated between $800,000 and $1.2 million in additional revenue.” The property tax rate is 66 cents, which the county says generates $388,500 per penny for total property tax revenue of $25 million. The sales tax increase is equivalent to 2 or 3 cents of property tax.

To read about the other four sales tax ballot measures, see here.

Joe Coletti is Director of Oversight Staff for the NC House Majority. Joe is a former Senior Fellow at Locke. Here, he examined fiscal and tax policy. He previously headed the North Carolina Government Efficiency and Reform initiative… ...

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