Like their counterparts at the state, federal, and city level, county government leaders have been trying to cope with tight budgets in the wake of the recent economic downturn. Some North Carolina counties have tried to address their budget woes by seeking voter approval for tax hikes. Dr. Michael Sanera, John Locke Foundation Director of Research and Local Government Studies, discussed the issue with Donna Martinez for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)
Martinez: It seems like local officials are always worried about funding. Now there’s some talk around the state about, well, is it time to try to push for more sales tax money.
Sanera: Well, yes. And that’s the pattern. Instead of looking at spending and cutting unnecessary spending or low-priority spending, they always want more revenue. And of course, we know from our look at budgets all across the state and in counties, that there’s always some areas that are low-priority. And those things need to be looked at first before they even talk about taxes.
Martinez: Now when we think of local taxes, I’ll just speak for myself, I automatically think of the property tax rate. Is there any talk that you’ve heard of that some localities, some counties, might be trying to raise the property tax rate?
Sanera: Not that I’ve heard. I’m sure there are some, and I’m sure that they’re going to be tinkering around with that, in some cases. But I think the general public is so aware that tax increases of any kind in this economy are things that they need to stay away from. And, I think there would be a lot of anger from the public if they start messing around with any taxes at the local level.
Martinez: But yet, there are some officials who are saying, “Well, we need to get more sales tax revenue. Let’s try that.” How is it that localities can even try to raise the sales tax rate? How do they have that authority?
Sanera: The state legislature in 2007 allowed the counties [to ask voters for approval] to either levy a quarter-cent sales tax or a land transfer tax. Since that time period we’ve seen probably around 75 to 80 elections in counties all across the state. Sometimes the county will come back three, four times and ask voters to vote and vote and vote. If you don’t get it right the first time, we’re going to keep trying!
Martinez: Because with this authority, they do have to put this [quarter-cent sales tax hike] before the voters.
Sanera: Correct. And so the legislature did put that very good provision in there. The [county] commission can’t do it on its own. They have to have an advisory vote of the voters in that county.
Martinez: You mentioned election time and special elections. It’s been interesting, the history of trying to raise the sales tax in North Carolina. Sometimes this is happening on special election dates. Tell us about that. Why would it be a special date?
Sanera: Well, we normally think of elections either in the primaries in May or the general elections in November, and many states have opted to follow that pattern — to put it on the ballot when most people are expecting an election; they’re turning out for other types of elections. So we commend the counties that have done that. Now, a few counties have figured out that there’s a trick to this.
Martinez: A trick?
Sanera: That is, let’s see if we hold it on a special day. Let’s just pick a date out of the air. How about Jan. 8? Are people expecting an election on Jan. 8?
Martinez: Probably not.
Sanera: No. And so that’s the one tried in Alexander County, and it was one of the first. Since that time, some county commissions have said, “Hey, this is a good trick. We can hold these on dates when we know that our people, the people that generally benefit from these taxes — meaning the county employees, the school employees, and other people that are directly impacted by a county budget — they’re going to turn out in numbers to vote for this.” Other people may not have heard about it, are not expecting it, they might not read the paper, etc., etc. And so the turnouts have been very low.
We ran the numbers on this, and we found out that, for instance, on the Aug. 3 election in Robeson County in 2010, 4.2 percent of the registered voters turned out for this election. I mean, that’s a travesty. That should be an embarrassment to county commissioners —who are there as a representative of our democracy in this country — when you have a 4.2 percent [turnout] in order to get that. One of the highest ones was Alexander County on Jan. 8, 2008, and that was 9 percent [turnout]. So these haven’t ranged more than 10 percent [turnout] in these special elections.
Martinez: How much of a sales tax rate hike are we talking about?
Sanera: It’s a quarter-cent sales tax, and the money is for the county. Now, the other trick that they use is they promise the world about what they’re going to use this money for — we’re going to use this for schools, we’re going to build a new jail, we’re going to do this, that, or the other thing. So they build a list of what they think is high-priority and necessary spending in the county, so people will vote for it.
Martinez: Constituencies that would turn out to vote.
Sanera: And even the general public to some extent. You know, who can be against a new jail or new police cars or public safety or education? But the problem is that, by law, they’re not bound by any of those promises. They can spend that money on any legal purpose within the county, and this commission that makes that promise, they might follow through for a year or two, but any future commission is in no way bound by these commitments to spend it on particular things. So, again, they’re perpetrating — I don’t want to say fraud or falsehood — but they’re misrepresenting the legal aspect of these votes in order to get the public to vote for them.
Martinez: Michael, at the same time that the legislature gave the counties the authority to put a sales tax rate hike before voters, they also several years ago gave them the authority to put a land transfer tax hike on the ballot. That has not had a very good history, and now the legislature is revisiting that. [Editor’s note: After this interview, the General Assembly approved and Gov. Beverly Perdue signed legislation to repeal the land transfer tax.]
Sanera: Right. What happened there is that they thought that this was a good idea because then it would supposedly be paid by the person that purchased the house. But every homeowner knows, and every landowner knows, that it doesn’t always work out that way. That’s something that is going to impact on the sale price of the house. That is just yet another problem when you go to sell your property. And all of these [land transfer tax votes] went down. All of these went down in flames. And now for a year or so, none of the counties have even suggested to put that on the ballot.