News: Charlotte Exclusives

The Myth of Alternative Revenue

Fact is taxpayers pay taxes, always will.

Now that Mecklenburg County has passed a whopping $70 million property tax hike and the city of Charlotte struggles with its own more modest tax-raising budget, the cries for “alternative revenue streams” are coming in fast and furious. Do not be deceived, there is no such thing.

There is only one source of tax money: taxpayers. Taxpayers are the people who hold down jobs and earn income that governments then tax away in a variety of sometimes hard to follow ways. For example, no one doubts that individual taxpayers pay local retail sales taxes, it says so right on the receipt. But no one from the government is standing at the register to collect the tax, it is left to the business to do that – or else.

And so it is with a host of other local taxes – hotel, rental car, restaurant meals – all are passed through to the pockets of individual wage-earners as surely as that annual property tax bill. The burden of a tax always falls on individuals even if the incidence of the tax, where it is collected by government, is someplace else.

The term alternative revenue stream actually supposes there is an alternative reality where local taxpayers are not really the tax payers. But unless Mecklenburg County and Charlotte have a secret way of taxing, say, Martians, that notion is pure fiction.

Even the terminology for “alternative revenue” options is divorced from reality. The most popular alt-rev source, the impact fee, makes it sound like one class of oft-demonized business-owner – the Developer (boo! hiss!) – will pay this fee out of their vast stores of ill-gotten loot.

In reality, impact fees are homeowner tax surcharges; taxes local government collects from wage-earners who buy newly constructed real estate. Add $3,000 or $4,000 or $5,000 to price of new home and that is the alternative reality supporters of impact fees seek.

Similarly, real estate transfer taxes are, in fact, family mobility surcharges. If you want to move, you have to first pay government for the privilege. These taxes got their start via the idea that it somehow costs government money when real estate changes hands, so a modest fee was required to offset those costs. In many jurisdictions where these taxes have been on the books for some years they have grown to add thousands of dollars to cost of buying or selling a home. In fact, to keep the burden somewhat manageable it has often become the custom for buyers and sellers to split the transfer taxes so that each pays only $2,000 or $3,000 at closing.

But the single most disturbing and downright mendacious myth is that local government is somehow short of revenue. In fact, both the city and county are collecting tens of millions more in revenue in 2005 than they were in 2004, which is millions more than in 2003, and so on. Example: the $26 million increase in Charlotte-Mecklenburg Schools’ operating budget is $11 million less than the expected $35 million increase in property tax revenue without the just-passed tax hike. Why does the county need $80 million more for everything else? Where does it end?

Charlotte-Mecklenburg’s total tax burden is already undeniably the highest in the state for any comparable, i.e. non-resort, locality. And overall North Carolina has one of the highest tax burdens in the Southeast. How does piling yet more taxes on the ledger help keep Charlotte competitive? What happens when existing revenue growth begins to slow – alternative-alternative revenue streams?

There is simply no denying it; anyone braying for more tax revenue for local government is downright delusional. They might need some alternative medicine or alternative therapy, but alternative revenue? No.