North Carolina’s current budget bill is unconstitutional.

The current budget bill in the General Assembly is a radical socialist redistribution plan. It illegally transfers locally levied sales tax revenue across counties. The end result is redistribution of local tax revenue from wealthy urban counties and tourist-destination coastal counties to poorer counties across the state.

I voted against the budget for the following reasons:

1. The current budget bill is unconstitutional.
Simply put, the budget is unconstitutional, especially for the people I represent in Mecklenburg County. It is a due process violation to take tax revenue from one jurisdiction and give it to another.

For Mecklenburg County, it also violates the vote of the people. Mecklenburg County’s 1% point-of-collection tax was imposed under a local act that was afterwards voted on by the county’s voters. It is not a statewide act. My constituents did not vote to give sales tax revenue generated in their county to any other county.

If enacted, this budget bill will join the long list of unconstitutional legislation enacted by the current General Assembly. It will undoubtedly be challenged in court, and overturned, after millions of taxpayer dollars are wasted on defending the bill.

2. The budget bill is based on four patently false assumptions about sales tax in North Carolina.

First false assumption: Everyone pays an equal amount of sales tax.

People with higher incomes spend more money, and consequently pay more total dollars in sales taxes. The higher someone’s income, the higher their deduction is under the IRS’s table for calculating the federal deduction for sales tax. Mecklenburg County’s per capita income is among the highest in the state at $32,482. It’s no surprise that people in higher-income counties pay more sales tax than those in lower-income counties.

Second false assumption: All sales tax collected in the state is generated by residents of this state.

Many places in North Carolina are tourist destinations that attract a large number of visitors from outside the state who pay sales tax while they are in North Carolina. Tourist destinations have amenities that attract visitors, and with those amenities come expenses for the host city and county. The sales tax revenue generated by visitors provides a source of revenue for expenses on these amenities.

Third false assumption: There is a significant shift of sales tax revenue from one county to another.

40% consists of the sales tax base consists of food and basic household services. These services are only taxed by the state. It is not surprising that lower-income counties have less local sales tax revenue because these sales taxes they pay are not subject to distribution based on the point of collection.

Another fact is that the local point-of-collection sales tax revenue is distributed on the “destination” principle. For example, if an Albemarle County resident buys a refrigerator at a Sears in Mecklenburg County and has it delivered to their home in Albemarle County, Mecklenburg County does not receive the sales tax revenue – Albemarle County does. This also applies to online purchases. Consequently, there is no “shift” of sales tax revenue from one county to another on appliance and online purchases.

Fourth false assumption: Every county has equal capacity to generate sales tax revenue.

Circumstances peculiar to each county determine this. Factors include income and ability to attract tourists, but also the presence of military commissaries. For example, under federal law, sales at military commissaries cannot be taxed by the state or its local governments. There is no shift of sales tax revenue when items are purchased at a commissary because there is no sales tax revenue to shift.

3. Property taxes will increase if the budget bill is enacted.

The budget bill forces Mecklenburg County and its constituent cities to increase property taxes to maintain their current levels of public service. This is done by taking away revenue generated in the county, and at the same time, repealing the county’s current authority to levy a ¼ cent sales tax.

4. Hospitals will feel extreme adverse economic effects from the budget.

This budget bill would damage hospitals in Mecklenburg County by greatly reducing sales tax refunds for hospitals. The budget would take revenue the revenue gained by revoking the reduced sales tax refunds for hospitals and redistribute it to other counties.

The budget bill is unconstitutional and an economic detriment to the state of North Carolina.

In closing, this plan attempts to make weaker counties strong by making the stronger counties weak. It is a recipe for disaster for North Carolina’s economic well-being. Taking sales tax revenue from Mecklenburg County and giving it to Jones County, for example, is not going to create jobs or increase educational attainment levels in the county receiving redistributed sales tax dollars. The budget bill, rather, will force donor counties to raise property taxes to cover the losses resulting from the budget. As it is, for example, Mecklenburg County’s tax rate (.8157) is already higher than Jones County’s (.80).

If some counties in the state need additional resources beyond the revenue that they can currently generate, the state should be the backup source of revenue; not an illegal grab of local revenue dollars. State income sources, such as corporate income taxes for the Public School Building Capital Fund and appropriations to the Rural Economic Development Center, have been eliminated in recent years.

Perhaps it’s time to stop that trend as well.

www.mainstdems.org

PAID FOR AND AUTHORIZED BY THE NC MAIN STREET DEMOCRATS PAC