Brown, McCrory at odds over tax shift

by Barry Smith, Carolina Journal, July 21, 2015.

State Senate Majority Leader Harry Brown and Gov. Pat McCrory waged a war of words Tuesday over the Onslow County Republican's proposal to rework the way local sales taxes are allocated.

“We believe our current sales tax system needs reform,” said Brown at a noon press conference. “Today, retail is centered in a few prosperous urban areas. People from everywhere else travel there to buy everything from appliances to clothes to food, and they leave their tax dollars behind. As a result, the current system is inequitable.”

A version of Brown’s sales tax plan was included in the budget passed in June by the Senate. It would shift the distribution of sales tax revenues from the current formula favoring the location sales are made to one emphasizing county population.

McCrory, also a Republican, vowed to veto Brown’s plan if it reaches his desk.

“This bill will result in a tax increase for millions of hard working middle-class families and small business owners throughout North Carolina,” McCrory said. “Redistribution and hidden tax increases are liberal tax and spend principles of the past that simply don’t work. More importantly, this bill will cripple the economic and trade centers of our state that power our economy.”

McCrory then went on to push for economic development alternatives, namely his “NC Competes” economic development programs and his proposal transportation and infrastructure bonds.

“This legislation will decimate our travel and tourism sector, particularly in our mountain and beach communities, shop owners and their employees who depend on tourism for their livelihood,” McCrory said of Brown’s sales tax redistribution proposal. “Instead of pursuing left-wing ideas that continually fail, it’s time for the General Assembly to get to work on job creation for all North Carolina.”

Brown wasn’t done. In a statement issued Tuesday evening, he said, “I can’t figure out if Pat thinks he is the Governor of Charlotte or the Mayor of North Carolina. Today, over 100 local officials from across the state came out in support of sales tax fairness.”

Calling the governor “tone deaf,” Brown continued, “Pat has spent 85 percent of our incentive money in the three richest urban counties and passed a transportation plan that diverts road money away from rural areas to urban areas, so it is hard to take his idea to help rural North Carolina by doing more of the same seriously. I have repeatedly asked the governor for a real plan to help the more than 80 counties across the state that benefit from the Sales Tax Fairness Act, and I am still waiting on his response.”

Currently, three-fourths of the local sales tax collections are distributed based on their collection site, with the remaining one-fourth distributed based on population.

Brown’s bill would phase in a change. By the 2019-20 fiscal year, 80 percent of local sales tax collections would be distributed based on population and 20 percent would be distributed at the point of collection.

Brown acknowledged that while most rural counties would gain under his plan, some of the more urbanized counties with retail centers would lose. He said 83 of the 100 counties would benefit under the plan.

In the packed press conference room at the Legislative Building, Brown said people came from 40 North Carolina counties to support his plan.

One of them was Robeson County Manager Ricky Harris.

“Robeson County hasn’t built a school since 1983,” Harris said. “We have 114 mobile units that we use in our schools.” He said the change would help pay for building new schools.

Brenda Kays, president of Stanly Community College in Albemarle, said unequal tax distribution hurts her students.

“Currently, where you live as a community college student dictates the quality of your educational experience,” Kays said. “The students who attend Stanly Community College pay the same tuition rate as those students who attend the larger community colleges in the state. However, while they pay the same tuition rates, they are placed at a distinct disadvantage because they do not have the same access to services, technology, or cutting-edge educational programming.”

Hyde County Schools Superintendent Randolph Latimore said the county needs money to build a school bus garage.

“We have in Hyde County a bus garage that was built in 1939,” Latimore said. “We cannot get our buses into the bus garage for their inspections. We can get the hood part in, but the other part of the bus is outside.” He said some residents drive two hours or more to find major retail outlets.

Jim Baker, a Madison County commissioner and retired superior court judge, said the lack of revenue from local sales taxes hurts county economic development efforts.

“We do not have industry moving in,” Baker said. “We can’t support industry. We can’t afford to do any incentives to bring industry in.”

The head of the N.C. Association of County Commissioners said his group prefers a solution that would not pit some counties against others.

“The association has been working with Sen. Brown and other legislative leaders throughout the session to find a plan that will benefit all 100 counties,” said Kevin Leonard, executive director of the association. “We appreciate Sen. Brown’s willingness to bring this issue to the forefront and include us in the conversations. The proposal creates winners and losers, and as an association that represents all 100 counties, it is our duty to strive to identify solutions that benefit all our members.”

Paul Meyer, executive director of the N.C. League of Municipalities, praised Brown for his “passion about helping rural North Carolina. He is right. Rural North Carolina towns and cities need help finding ways to reinvigorate their economies after several decades of job losses associated with the decline of the textile and furniture industries.”

Barry Smith (@Barry_Smith) is an associate editor of Carolina Journal.

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