Taxes' rankings average

Staff WriterFebruary 4, 2003 

A new report on taxes from Governing Magazine could help cut through the rhetoric likely to pervade Raleigh this year when -- and if -- the General Assembly begins work on a state budget.

In the report, North Carolina earned seven out of a possible 12 stars over three categories -- adequacy of revenue, fairness to taxpayers and management of system.

That puts this state smack in the middle of the rankings, according to Katherine Barrett, project director for the report, which is called "The Way We Tax" and is available online at www.governing.com.

"It's kind of middling," Barrett said of North Carolina's ranking. "It does very well in the management area and not so well but not badly in the two other categories."

Mostly, the report details characteristics of North Carolina's tax system that budget writers and elected officials here know all too well:

* North Carolina is very dependent on the income tax, collecting 52.8 percent of its revenues that way. That makes for volatile revenues, as budget officials discovered when capital gains receipts began plummeting with the economy two years ago.

* The state has a narrow sales tax base, collecting just 17.8 percent of its revenues from this source and excluding most services from taxation even though consumers spend greater and greater shares of their income on such items. The sales tax schedule also includes more exemptions and credits for particular industries or high-dollar items than most other states, according to the report.

* North Carolina is the only East Coast state without a lottery.

* The state is ranked 23rd nationally for state tax revenues as a percentage of personal income, but only 35th for state and local tax revenues as the same percentage. The report does not account for the growth of fees, at both state and local levels, which Barrett said are often "taxes in disguise." She said such fees are adding up particularly on the local front as the state passes financial pressures onto cities, towns and counties.

* North Carolina was one of just four states to increase taxes by more than 1 percent in 2001. Still, because of the structural deficiencies of its tax system, it faces yet another budget shortfall two years later.

Easley supports ports

Gov. Mike Easley on Monday toured the Port of Wilmington, where federal funding for a dredging project is in jeopardy in President Bush's proposed budget.

The State Ports Authority is looking to Washington to pay for $295 million of the $440 million price tag for the project, which began in 1998 and is scheduled to end by the end of this year.

The U.S. Army Corps of Engineers is supervising the project, which is to deepen the Cape Fear River's navigational channel from 38 to 42 feet.

Those four feet would allow container ships to carry enough additional cargo to increase annual shipments 15 percent. The project is expected to yield an additional 25,000 jobs statewide and $89 million of state and local tax revenues, according to the Governor's office.

Easley visited the port for a tour and briefing on the status of the project, and to emphasize his support for its completion, spokeswoman Cari Boyce said.

"One thing that the governor wanted to highlight is the fact that the improvements at the port are not simply going to benefit that region," Boyce said. "The economic impact of the increased traffic and jobs that will be created is going to spread statewide."

By staff writer Amy Gardner, who can be reached at 829-8902 or agardner@newsobserver.com.

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