Two years ago the N.C. Association of County Commissioners was able to convince the General Assembly that allowing counties to raise their sales taxes by 1/2 percent was a good idea. Actually, I suspect reality was a bit different, meaning that the NCACC realized that the legislature was going to continue abusing counties and that this was the best that counties could get. But counties are still becoming more desperate for funds.

Counties did adopt the sales tax increase and, according to a Center for Local Innovation study recently released, they raised their property taxes as well. But with property and sales taxes both on the rise and with many budget cuts already in place, counties are still struggling to keep up with spiraling budget issues.

Normally, I would have to side with the counties in such situations because they have to deal with a crushing presence of state and federal government mandates in their budgets. But having exhausted reasonable increases in property and sales taxes, NCACC is now encouraging counties to look at impact fees.

In fact, the Durham County Board of Commissions recently voted to impose a $2,000-per-home impact fee on every new single-family house. Multifamily dwellings will be hit with a $1,155 impact fee. I actually like the name, because being hit with either of those is a significant impact on the cost of the home. This is being contested in court, but was passed nonetheless.

Keep in mind that this isn’t scaled out to accommodate cheaper homes. Whether the new construction is for a $100,000 home or a $1 million home, the fee is the same. This is all based on NC General Statute 153A-102, which allows counties to establish fees for mandated services (notice the use of the word mandate).

But once again, instead of pushing the legislature to remove the mandates, the association decided that impact fees were a good idea.

At its meeting Jan. 14, the association passed a resolution asking that all counties grant this “further consideration” in dealing with their budgets.

The fees are proposed to fund school capital expenses. The argument is interesting because local county governments must deal with these expenses (again by mandate). But instead of simply accepting that the costs are to be incurred, the association should spend more time alleviating the mandates and less time figuring out how to take more money from taxpayers.

Keeping up with this is a real challenge for taxpayers as well as for elected officials. They already have a sense for what is happening on the property-tax front, they’ve even accepted the sales tax increases, but now, a pretty steep impact fee for a new home? In a slowly improving economy why would any elected body choose to create a disincentive for new construction?
This is similar to Congress’s attempt in 1989 to raise money from the wealthy with the enactment of the luxury tax. The tax amounted to a 10 percent flat tax on new-car and boat purchases that cost more than $50,000. The belief was that the rich would pay it and millions of dollars in new tax revenue would pour in.

But the truth was alarming. The rich bought used cars and boats and avoided the tax. Hundreds of boat-industry jobs dried up and became the real victims of the ridiculous law. Members of Congress realized their error and repealed the law the next year.
In short, congressional thinking was that the economy was static and that it would continue as it had for most of the 1980s. But laws have consequences that reverberate throughout affected industries. A similar situation could occur in North Carolina.

If housing is strong and new homes face this absurd tax (call it what you will, abut that’s what it is), buyers will stop buying new homes and builders will look to build in more reasonable environs. Building codes and regulations already border on the bizarre in many areas, and this does little to encourage economic growth.

We should be having a debate on continued problems in funding local government, not finding new ways to obfuscate the taxation of citizens. Folks should pay attention to this bad idea. Odds are that it could be on everyone’s county’s agenda next.