Changing way sales tax distributed no fix for rural NC

Editorial by News and Observer, March 16, 2015.

When President Obama or other Democrats talk about the need to raise taxes on the wealthy to give the middle class a break, Republicans scream about “wealth redistribution” as if the president were going to send the National Guard in to country clubs to steal the silver.

People should keep the money they earn, the GOP mantra goes. We have to be fair to them. Their tax burden already is too high, and this awful redistribution of wealth is pure evil and a first cousin to socialism. Bad, bad, bad.

Ah, but a discussion in progress in Raleigh, on Jones Street where Republicans rule the General Assembly, has a different take on wealth redistribution. Namely, that when it means taking from the big ol’ (and sometimes Democratic) cities and handing it over to rural counties, it’s just fine.

Republican Sen. Harry Brown, majority leader from Jacksonville and one of his chamber’s budget architects, says he expects to file a bill that will change the way sales tax revenues are distributed. Under current law, a portion of sales tax revenue is given back to counties based on where the sales occurred. It seems a simple and fair system.

For counties like Wake and Mecklenburg, where retail centers are plentiful, the money is significant. Brown argues that a system of distributing the revenue based on where people live, or per-capita, would be fairer and a boost to rural counties.

But if such a system were adopted, it could mean a loss to Wake and its cities of about $18 million. In Mecklenburg, the loss could be $35 million.

If this isn’t the cursed redistribution of wealth Republicans are always complaining about, what is?

Rather, it seems a continuation of tensions ramped up by Republicans who seem to want to pit rural North Carolina against urban North Carolina. That’s not fair to either the cities or those counties that are almost entirely rural.

For the cities, the loss of revenue would almost inevitably lead to property tax increases to meet needs for services and roads that currently are covered by sales tax revenue. When you add such a loss to the blow of losing the business privilege taxes that helped cities (that will cost Raleigh about $7 million), it’s going to mean a tax hit in the cities. Without a subsequent property tax increase, cities would be looking at cutting back services, which would hurt things like downtown revitalizations involving projects such as Raleigh’s Union Station.

There is no question that rural North Carolina is in need of jobs and investment from the state. So where are GOP legislators and Republican Gov. Pat McCrory with investment and infrastructure plans that don’t pick the cities’ pockets in order to help those rural counties? Have they no ideas about how to accomplish more in the rural counties without hurting the urban areas that drive the state’s overall economy?

After all, businesses interested in establishing headquarters in the state need the urban centers for access to airports and other services they need. But the fact that they go to the cities doesn’t necessarily hurt the less-populated areas nearby. In fact, there is economic benefit to communities and towns within a fairly good-sized radius.

Outside the state’s big cities, Republicans (although Brown believes the idea will have bipartisan support) can make a populist argument about spreading the wealth. It’s true, after all, that many rural counties would see some money that would enable them to improve school buildings, for one example. But the state could take that step, especially considering the economic rebound, without hurting cities.

An idea that would help rural areas without hurting cities and risking a financial hindrance on their growth would be welcome. But this one isn’t it.