A new John Locke Foundation report highlights the ever-increasing cost of local government that North Carolina’s citizen-taxpayers pay. The report, By The Numbers, calculates the local tax burden in each of the state’s counties and municipalities. For fiscal 2003-2004, the average North Carolinian paid about $17 more for local government, after adjusting for inflation, than they did a year ago.
Calculating burdens
Local governments in North Carolina are required to file audited financial statements with the Department of State Treasurer each year. By the Numbers builds upon this information, which is available online at www.nctreasurer.com/DSTHome/StateAndLocalGov/AuditingAndReport ing/AFIR.htm.
By The Numbers examines property tax, sales tax, and total local-government collections of all taxes and fees for counties and municipalities for fiscal 2003-2004, 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 are also ranked against each other for both the per-capita collection and collections as a percentage of personal-income categories. Municipalities are sorted by population and ranked within four population ranges (under 1,000 population; 1,000-4,999; 5,000-24,999; and 25,000 and over).
The report also calculates the dollar amount and as a percent of personal income that a typical resident of each county would pay in taxes and fees to local governments.
For comparison, figures for the previous year are also included in the report.
While By the Numbers 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 their local government might not provide. In unincorporated areas, for example, homeowners may have to contract privately for garbage pickup, while those living in a town or city may well receive this service, paid for through their municipal property and other taxes. Municipalities might also use some of their tax dollars to provide a higher quality of fire protection, which might translate into 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. Citizens of North Carolina’s cities and counties must decide whether the services they receive are worth the price they and their fellow residential and business taxpayers are paying in local taxes and fees.
Burdens up
In fiscal 2003–2004, the typical resident of the median county in North Carolina paid $1,088 in taxes and fees to county and municipal governments. This accounted for 4.64 percent of personal income and a 5.1 percent increase over 2002–2003, when collections were an inflation-adjusted $1,071. Collections in 2001–2002 were $1,016 per capita. The total cost of local government as a percentage of income shows a similar increase.
Because many of the counties with the highest tax burdens were also among the state’s most populous counties, 4.84 percent of the average North Carolinian’s personal income went toward the cost of local government in 2003-04.
North Carolina localities collected $5.93 billion in property taxes, $2.18 billion in sales tax revenues, and $2.19 billion in other nonutility taxes and fees in 2003-2004. Water-sewer fees and sales came to an additional $1.47 billion.
There was a change in the relative share of these revenue sources in fiscal 2003-2004. While property-tax revenues were up by $340 million — and grew at a rate significantly faster than inflation and population growth — they were not the largest source of additional revenue for localities. Sales-tax revenues were up by even more, $448 million, the result of higher local sales tax rates authorized by the General Assembly and a somewhat stronger economy. These gains were offset by a $124 million reduction in other non-utility taxes and fees revenues; collections from these sources had expanded rapidly in 2002-2003 while many localities struggled to balance their budgets.
High and low burdens
Dare County residents paid the highest amount in taxes and fees to local government ($3,573 per capita). Currituck ($2,281), Mecklenburg ($2,263), Brunswick ($1,949), and New Hanover ($1,932) also rank in the top five in revenue collected per capita by county and municipal governments. The results for Dare and Currituck reflect, in part, their popularity as vacation destinations, with relatively small permanent populations for the property tax base that exists there.
Alexander ($657), Madison ($665), Gates ($683), Caswell ($706), and Hoke ($710) county residents paid the lowest average amounts in taxes and fees to local governments.
The results were somewhat different when looking at the local tax burden as a percentage of personal income. Dare County again leads the way with county and municipal revenue accounting for 12.13 percent of per-capita personal income. Second through fifth were Hyde (9.07 percent of per-capita personal income), Currituck (8.58 percent), Brunswick (8.09 percent), and Bladen (7.75 percent) counties.
By comparison, taxes and fees collected by local government accounted for 2.68 percent of personal per-capita income in Alexander County. Second-lowest was Madison County at 3.08 percent of personal per-capita income. In nine other counties, total collections were at 3.5 percent of per-capita personal income or less.
Among the 26 cities with populations over 25,000, Charlotte had the highest combined city-county tax and fee collections per capita. Wilmington, Asheville, Durham, and Chapel Hill were also in the top five. The lowest per-capita collections were in Jacksonville, followed by Thomasville, Goldsboro, Kannapolis, and Rocky Mount.
The entire By the Numbers report is available on line at www.johnlocke.org/policy_reports/.
Where does your city or county rank?
Look at By the Numbers charts ranked by cities and counties.
Michael Lowrey is associate editor of Carolina Journal.