What Does Local Government Cost in N.C.?

RALEIGH— The average North Carolinian surrendered almost 5 percent of his personal income to fund city and county government in the 2008 budget year. That’s one of the key conclusions in the latest edition of By The Numbers, the John Locke Foundation’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 $1,330 in taxes and fees to county and municipal governments,” said report author Michael Lowrey, a JLF policy analyst.

“The good news is that total is down from the inflation-adjusted figure of $1,355 for the 2007 budget year. The bad news is that a price spike early in the 2008 calendar year bears some responsibility for the decrease. Next year’s report is bound to show an increase in local tax burden as 2009 and 2008 figures are compared on an inflation-adjusted basis.”

Nominal (noninflation adjusted) local government revenues were up by some $600 million in FY 2008 as compared to the previous year. This increase came almost entirely from increased prop¬erty tax receipts; sales taxes revenues were up by less than $100 million and other revenues actually decreased.

Calculating burdens

State law requires each county and municipality to file audited reports, which are available on the Web, with the state 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 2008 (July 1, 2007, to June 30, 2008), the most recent year 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 for both 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 individuals must pay for services that local government 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 municipal property and other taxes. Municipalities also might use some 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.” Lowrey said. “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 29 municipalities are not covered by the report; the localities still had not submitted data to the state more than a year after it was due.

The cost of local government

Dare County residents paid the highest total in taxes and fees to local government ($4,149 per capita). The counties of Mecklenburg ($2,687), Brunswick ($2,419), Currituck ($2,398), and Durham ($2,181) also rank in the top five in revenue collected per capita by county and municipal governments. The results for several of these counties reflect their popularity as vacation destinations.

Second homes and resorts appear on local tax registers. Because many owners or renters do not 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 Yancey ($770), Gates ($822), Caswell ($859), Greene ($877), and Jones ($882) 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 $45,483 per person in Mecklenburg County to a low of $ $21,770 in Warren County — looking at tax burdens as a percentage of personal income produces somewhat different results. Dare County again leads the way with county and municipal revenue accounting for 11.69 percent of per-capita personal income.

Second through fifth were the counties of Brunswick (8.23 percent of per-capita personal income), Bladen (8.13 percent), Hyde (7.84 percent), and Currituck (7.41 percent).

By comparison, taxes and fees collected by local governments accounted for 2.92 percent of per-capita personal income in Onslow County. Next lowest were Jones and Alexander counties at 3.05 percent and 3.12 percent of per-capita personal income, respectively. In 23 counties, total collections were at 4 percent of per-capita personal income or less.

Among the 33 municipalities with a population of 25,000 or greater, Charlotte residents again paid the greatest in taxes and fees to support local government, with combined city and county revenue coming to $2,587 per person. The next highest tax and fee burdens were in Asheville ($2,258), Chapel Hill ($2,253), and Wilmington ($2,125). Results for Wake Forest could not be calculated, as it did not file its audit report with the state as required.

The entire By the Numbers report is available online by clicking here.