CHARLOTTE – On Monday night I spoke during a public hearing before the Charlotte city council. The issue was a proposed city budget that would raise the property-tax rate by 9 percent over the next two years. After a great deal of gut-wrenching, agonized soul-searching, I decided to come out against the idea of jacking up taxes further in North Carolina’s most heavily taxed urban community.
In preparing some brief remarks on the subject, I came across some new information that helped put in perspective the Queen City’s tax structure compared with the rest of North Carolina and comparable cities across the nation. The most striking comparison was between the tax trend in Charlotte and Mecklenburg, where I was born and grew up, and the tax trend in Raleigh and Wake County, where I have lived for the past 15 years.
First, I told the city council not to be reassured by tables that compare just statutory property-tax rates. They aren’t really all that useful. Cities can be on different revaluation schedules. Also, what ultimately matters is how much tax citizens pay as a share of their incomes, which should reflect the various ways they get hit up by governments. Remember: a property tax is not really a tax on property. It is a tax on the incomes of property owners and, indirectly, on the incomes of renters.
The most recent report from JLF’s Center for Local Innovation found that about 5.7 percent of income in Mecklenburg goes to local taxes and fees, vs. 4.3 percent in Wake County. This is partly due to an extra half-cent sales tax for transit, but that’s not the whole story. Wake County ranks 75th out of 100 counties in property taxes as a share of income. Mecklenburg ranks 27th.
A separate ranking came out just last week from Forbes. It contained an overall cost of business index, including taxes. Charlotte came in at 18th lowest cost, which isn’t horrible by national standards, but then again Hickory was 5th, Greensboro 9th, and Raleigh was 10th. Overall, Forbes ranked Raleigh the 2nd-best place to live and do business. Charlotte ranked 42nd.
A recent national survey of 51 major cities by Money magazine ranked Charlotte 21st highest in tax burden. Sure, there were many cities with higher taxes: New York, Philadelphia, Chicago, Detroit, and Atlanta, for starters. But Charlotte’s tax burden was still higher than the average, and higher than such places as Denver, Seattle, Phoenix, Las Vegas, Virginia Beach, Memphis, Jacksonville, Houston, and Columbia.
It does no good to point out that Mecklenburg County taxes are worse than Charlotte city taxes, or that property taxes here are lower than property taxes in Seattle or Houston. It’s the total picture that matters, that influences the price-sensitive decisions of investors, entrepreneurs, executives, and high-value professionals. Charlotte’s total tax picture isn’t as rosy as it used to be. Perhaps that’s one reason why, in the latest Milken Institute study of the economic performance of 200 metros, cities in Florida, Arizona, and Texas were overrepresented in the top 30 or so. Raleigh-Durham was 34th. Charlotte was 50th. Again, that’s not horrible – but it could be a lot better.
Raising city taxes, I told the council, certainly won’t make it better. Here’s hoping someone listened.
Hood is president of the John Locke Foundation.