The average North Carolinian surrendered more than 4.5 percent of his personal income to fund city and county government in the 2008 budget year, according to a new report from the John Locke Foundation. That’s one of the key conclusions in the latest edition of “By The Numbers,” JLF’s yearly look at tax and fee collections by local government in North Carolina.
“The typical resident of the median county in North Carolina paid $1,304 in taxes and fees to county and municipal governments,” said report author Michael Lowrey, a JLF policy analyst.
“That’s up slightly from an inflation-adjusted $1,298 figure for 2008. But as a percentage of personal income, the number dipped slightly from 4.77 percent to 4.56 percent.”
Lowrey cautioned against misreading the numbers. “It’s likely that the figures actually understate the impact of local taxes and fees,” he explained. “Personal income figures are based on the 2008 calendar year, which showed increases for the state as a whole. The worst of the economic downturn is not captured in these figures.”
While the state’s average personal income figure grew in 2008, local governments’ tax and fee revenue dropped by some $250 million during the budget year that stretched from July 2008 through June 2009.
“Sales tax receipts fell by more than $400 million, miscellaneous taxes and fees were off by $250 million, but property tax collections increased by nearly $500 million compared to the previous year,” Lowrey said. “Compare lower budget-year tax collections to then still rising calendar-year income figures, and it appears that local governments are taking a lower percentage of personal income.”
Calculating burdens
State law requires each county and municipality to file audited reports, which are available on the web, with the N.C. Treasurer’s Office each year.
“By The Numbers” builds on that data and examines property taxes, sales taxes, and total local government collections of all taxes and fees for counties and municipalities for fiscal 2009 (July 1, 2008 to June 30, 2009), the latest year for which data is available.
For each of the three categories, a revenue per-capita figure was computed. Countywide figures also were calculated as a percentage of per-capita personal income.
Counties also are ranked against each other for both their per-capita collections and collections as a percentage of personal income. Municipalities are sorted by population and ranked within four population ranges (less than 1,000 population; 1,000-4,999; 5,000-24,999; and 25,000 or more).
While BTN shows the cost of local government, it does not attempt to measure the quantity or quality of services provided in exchange for those dollars. Nor does the report consider the additional out-of pocket costs to individuals for services that local governments may not provide.
In unincorporated areas, for example, homeowners might have to contract privately for garbage pickup, while those living in a town or city might receive this service, paid with their municipal property and other taxes. Municipalities also might use some of their tax dollars to provide a higher quality of fire protection, which could result in lower homeowners insurance rates.
“Importantly, this means that whether a jurisdiction is ranked high or low in cost of government is not the end of the debate over fiscal policy — it is merely the beginning,” Lowrey added. “Citizens of North Carolina’s cities and counties must decide whether the services they receive are worth the price they and their fellow taxpayers (residential and business) are paying in local taxes and fees.”
Work on this year’s report was complicated by a number of localities not filing audit reports with the state in a timely manner. Two counties — Graham and Hoke — and 27 municipalities did not file their reports in a timely manner and information on them is not available from the treasurer’s office.
The cost of local government
Dare County residents paid the highest amount in taxes and fees to county and municipal governments ($4,044 per capita). The counties of Mecklenburg ($2,480), Currituck ($2,366), Brunswick ($2,285), and Durham ($2,132) filled out the top five in revenue col¬lected per capita.
The results for several of these counties reflect their popularity as vacation destinations. Second homes and resorts certainly do appear on local tax registers. Because owners or renters only rarely live in these dwellings year-round, however, such localities typically have small permanent populations. High tax values divided by a small permanent population will produce a high per-capita tax burden.
Residents in the counties of Gates ($810), Caswell ($817), Alexander ($853), Jones ($888), and Greene ($908) paid the lowest average amounts in taxes and fees to local governments.
As per capita personal incomes varies widely across the state — from a high of $47,063 per person in Orange County to a low of $18,592 in Yancey County — looking at tax burdens as a percentage of personal income produces somewhat different results. Dare County again lead the way with county and municipal revenue, accounting for 10.66 percent of per-capita personal income. Ranking second through fifth were the counties of Hyde (7.40 percent of per-capita personal income), Brunswick (7.37 per¬cent), Currituck (6.77 percent), and Tyrrell (5.64 percent).
By comparison, taxes and fees collected by local governments accounted for 2.79 percent of per-capita personal income in Caswell County. Next lowest were Jones and Onslow counties at 2.80 per¬cent and 2.86 percent of per-capita personal income, respectively. In 32 counties, total collections were at 4 percent of per-capita personal income or less.
Among the 34 municipalities with a population of 25,000 or greater, Charlotte residents again paid the greatest about in taxes and fees to support local government, with combine city and county revenue coming to $2,361 per person. The next highest tax and fee burdens were in Chapel Hill ($2,276), Asheville ($2,176), Mooresville ($2,153) and Wilmington ($2,113).
The entire “By the Numbers” report is available online at johnlocke.org/policy_reports/.