SHARE-THE-WEALTH TAXATION AHEAD?

Paul Fogleman,

Last year legislators roiled over a proposal from Sen. Harry Brown of Jacksonville. He wanted to revamp the sales tax laws to put more money into low-wealth struggling counties. People in these counties, he reasoned, shop in more prosperous urban counties and therefore some of their taxes should come back. Legislators from urban areas opposed the concept as Wake, Mecklenburg, and Piedmont Triad counties would lose millions of dollars. The compromise was to expand the sales tax base and use this revenue to help rural counties in the east and west.

Last week legislators a study commission session on economic growth and global competitiveness received a mind-altering report. It clearly showed two North Carolinas: one experiencing rapid growth and prosperity; the other stagnant or losing population and tax base (graph 1). The counties around Charlotte, the Research Triangle, the Piedmont Triad, Fayetteville and Asheville represent 85 percent of the Gross State Product (graph 2). Only six counties report an average income of $44,959 or more (the state average). In other counties the average pay was up to 25 percent lower or more (graph3). Some counties are losing population. Jobs are disappearing in counties outside the large metro areas.

The data for this 45-page report will prompt serious deliberations in the upcoming session of the General Assembly. Already lawmakers are looking at lowering the state income tax and broadening the base for sales taxes. In March, home services, plumbing, personal services (i.e. haircuts, etc.) will be subject to the sales tax. Some leaders are predicting that professional services—legal, accounting, consulting—will be added to the base. Reportedly, the goal is raise $500 to $600 million.

A picture of the two North Carolinas is highlighted by the concentration of it population centers. Of the 535 municipalities in the state, over 200 have populations of less than 1,000. Only 38 have populations of 25,000 or more.

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