North Carolina House Overwhelmingly Rejects Senate’s Sales Tax Redistribution Proposal

Representatives Jason Saine and Bill Brawley (at podium) join other House members last week at a bipartisan rally to oppose the Senate’s Sales Tax Redistribution proposal.

The North Carolina House last week overwhelmingly rejected a Senate substitute to HB 117, the ‘NC Competes Act,’ because of language that would redistribute a larger portion of locally generated sales tax revenue statewide, likely forcing metropolitan counties like Mecklenburg to raise property taxes and fees to make up the difference.

The Senate’s proposal for a 50/50 Sales Tax Distribution between point of sale and county population was included in the economic development bill along with provisions to fund the JDIG job incentives program, expand data center tax incentives, and extend for four years the airline fuel tax exemption for American Airlines.

But the ‘compromise’ language on sales tax redistribution (the original Senate proposal redistributed 80% of local sales taxes statewide, compared to 25% under current law) was opposed by business leaders and elected officials from North Carolina’s largest metropolitan counties, who traveled to Raleigh last week to speak against the bill.  REBIC Executive Director Joe Padilla joined Charlotte City Councilman Ed Driggs, Charlotte Chamber President Bob Morgan, and Mecklenburg County CFO Mark Foster to speak last Wednesday at a rally organized by House Finance Committee co-chairs Bill Brawley (R-Mecklenburg) and Jason Saine (R-Lincoln), to oppose the Senate’s proposal and ask House members to resist any proposal that would change the current sales tax distribution formula.

Representatives from NAIOP’s Raleigh chapter were also on hand to speak against the proposal on behalf of the statewide commercial development association.

Numbers from the state’s Fiscal Research Division show the new proposal would still negatively impact the state’s metropolitan counties when it kicks in in 2016, with Mecklenburg County losing an estimated $12 million per year (5% of its annual sales tax revenue), Wake losing $6 million per year (4%), Durham $6 million per year (11%), Forsyth $1.5M per year (2%), and Guilford about $500,000 annually (1%). But numbers from the Mecklenburg County Manager’s office are more dire, showing an estimated loss of $64 million over four years, or $16.25 million annually.

The House rejection of the substitute bill, by a vote of 111 – 2, sends the legislation to a conference committee, where representatives from both chambers will work to hash out a compromise.

#NCGA #TaxReform

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