Executive Summary
One of the most controversial issues in North Carolina politics is how best to fund needed govern-
ment programs at the local level. At the state level, lawmakers have debated funding inequity in
public schools and the impact of population growth on the ability of localities to deliver services. More recently, the governor has eliminated state reimbursements for local taxes repealed during the 1980s, moves that cities and counties say could lead to additional tax increases or service reductions. In response, the General Assembly allowed localities to increase the local option sales tax. Most, but not all, counties have chosen to do so.
All of these debates would benefit from more and better information. Citizens need to know how much they are paying in local taxes and fees so they can decide whether additional sources of funding are needed.
Methodology
Using data on property taxes, sales taxes, and miscellaneous taxes and fees from the State Treasurer’s Annual Financial Information Report, we calculated county and municipal tax and fee burdens, 1) as a percentage of income (for counties) and 2) per capita (for counties and municipalities). We then constructed a set of rankings to more clearly view the cost of local government.
Although this analysis is by no means definitive, it moves citizens one step closer to grappling with this complicated issue.
Findings
North Carolina collected more than $15.3 billion in state tax and fee revenues for fiscal year 2000-2001. This represented 7.0 percent of the personal income of the state’s citizens. In addition, local governments collected an additional $9.6 billion in property, sales, and other taxes, fees and sales, representing another 4.4 percent of personal income. Combining the two yields an 11.4 percent state and local tax and fee burden. Federal collections raise the total cost of government to approximately 32.8 percent of North Carolinians’ personal income, on average.
In 2000-2001 the median total property tax burden by county in North Carolina was 1.99 percent of income, or just over $451 per person. The median total local burden by county (including property, sales, and other taxes and fees) was about $904 per person in 2001, virtually unchanged from an inflation-adjusted $908 in 2000. As a percentage of income, the median burden by county was 4.04 percent, down from 4.17 percent in 2000. The average cost of government — which reflects the proportional impact of populous counties such as Mecklenburg and Wake — was 4.29 percent, again down slightly from 4.36 percent in both 2000 and 1999.
Among the state’s 10 most populous counties, New Hanover (5.77 percent), Durham (5.72 percent), Mecklenburg (5.27 percent), and Guilford (4.86 percent) ranked relatively high in average cost of local government. Gaston (4.5 percent), Buncombe (4.28 percent), Cumberland (4.24 percent) Forsyth (4.08 percent), and Wake (4.05 percent) were in the middle of the pack, while Davidson (3 percent) ranked low.
It is important to note that incomes vary among counties and within counties over time, and this can affect the rankings. Counties of similar size and similar tax collections can vary in their burden because of differences in reported incomes. Differences among counties can also reflect the rate and extent of annexation, which places more taxpayers onto municipal tax rolls. Additionally, our analysis excluded intergovernmental revenues, municipal electric and gas charges, bond-sale proceeds, and several other revenues.
Finally, there is a wealth of detail, by county and by municipality, in the appendices accompanying this report. Though some data were not available, overall this report presents a fairly comprehensive picture of the cost of local government in North Carolina.
Download and read the report here- https://www.johnlocke.org/acrobat/homePageFeatures/local_tax_report_2003.pdf
Appendix A: County by County Data- https://www.johnlocke.org/acrobat/homePageFeatures/appendix_a_2003_n.pdf
Appendix B: Combined County & Municipal Revenues by Municipality- https://www.johnlocke.org/acrobat/homePageFeatures/appendix_b_2003_n.pdf
Appendix C:Annual Financial Information Report (AFIR)- https://www.johnlocke.org/acrobat/homePageFeatures/appendix_c_n.pdf
