Chapel Hill: Opinion

Kirk Ross: Tax plan could be game changer

My View

A lot of ideas proposed in our state capital claim the title of game-changer. Few deserve it, but this week one did.

The progress of this proposal should be of particular interest here in Orange County because it has the potential to cause a profound change in the way we plan and what kinds of strategies make sense to pursue.

Senate Majority Leader Harry Brown announced a plan to rebalance the distribution of the state sales tax from one that skews toward counties where the tax is collected to one exclusively based on a per-capita payout.

Brown, who has been leading the fight for rural counties in the ongoing urban-rural feud, distributed a map of the state showing the up and down adjustments for each county after a three-year phase in of the plan.

Durham, New Hanover, Mecklenburg, Buncombe and some coastal counties with special rates still in place from sweet deals in the past take the biggest hit. That makes sense since those are the counties that have become the big retail hubs, and they’ve been the winners under a system that distributes more sale tax revenue on a point-of-sale basis.

Even more interesting is the other side of the equation. Much of the rest of the state – 93 out of 100 counties – comes out ahead under the plan. Many of the counties with the state’s highest unemployment and poverty rates would see more than a 100 percent jump in their sales tax revenues.

The bill’s chances are a question mark. It has yet to pass the Senate, where it has the full blessing of Senate leader Phil Berger. The governor has said he’s not happy with it and the House has yet to discuss it.

That said, there appears to be a powerful interest on the part of the legislature to redistribute the wealth created in the high-growth economies of the urban areas. Some variation of this bill, such as a longer phase-in or a less drastic altering of the formula has a strong chance of coming out of this session.

Regardless of whether you think this is some new brand of socialism or just another dictate from Raleigh, a hard look at the impact here in Orange County is due.

According to Brown’s map, Orange County would see a 30 percent jump in sales tax dollars. Early estimates put the total increase to the county at around $7 million and a loss of $2 million to the towns. If the county decides to spread the wealth as well they could hold the towns harmless and still end up with a substantial annual boost.

Rethinking retail?

Another game-changing aspect of the proposal is how it could affect our local planning. It would greatly alter the overall benefit of increasing retail development, which has become a top priority. This raises a number of questions for policy makers going forward.

Think about all the strategies employed to stop the retail “leakage” to Durham, Chatham and Alamance counties. A lot of that is aimed at capturing sales taxes. But if sales taxes are no longer allocated based on point of sale, would it still make sense to worry so much about people spending money on the other side of the county line? Would the tradeoffs of big retail developments make as much sense? Would residential housing and non-retail commercial space suddenly make more sense?

And, maybe most important of all, if there’s no longer a battle over capturing sales taxes, would we see less jurisdictional competition and more cooperation between neighbors?

It’s worth keeping an eye on this bill and what it will mean. By this time next year it could be a whole new ball game.

Kirk Ross is a longtime North Carolina journalist, musician and public-policy enthusiast. Contact him at kmr@rossalmanac.com 

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