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Sales tax split: Steal the wealth plan hurts cities

An editorial from the Greensboro News & Record:

Guilford County isn’t the richest county in the state, but it collects more sales-tax revenue than most. It would keep less of it under a Senate plan that’s now being considered in the House.

This share-the-wealth scheme was devised by Republicans, but it really pits rural against urban interests. Despite boasts in Raleigh of a “Carolina Comeback,” many counties and small towns are in economic decline, bleeding population and tax revenues. Rather than try to grow those economies, some legislators think the answer is to divert sales-tax money generated in urban areas to poorer counties.

Senators backed off initial proposals for a drastic redistribution. But they settled on a formula that’s still bad for Guilford County, which would lose about $750,000 a year. …

“The Senate’s proposal is tantamount to a tax increase,” Guilford County Board of Commissioners Chairman Hank Henning, a Republican, wrote on Facebook. That’s because commissioners would have to raise property taxes to replace the lost revenue.

Wake, Mecklenburg and a few other counties also would lose money. Most counties would gain. The political numbers, at least in the Senate, favor the rural counties.

Senate leader Phil Berger (R-Rockingham) supported the plan, even though his district includes parts of Guilford County. But Rockingham County is a big winner.

The issue is muddled because the Senate added the sales-tax provisions to an economic incentives bill called The N.C. Competes Act. These matters should have been addressed separately. They were combined to win more support for the sales-tax measure.

That’s unfortunate, because the bill offers some benefits, especially for “high-yield projects” … But those features don’t justify stealing sales-tax revenue.

Some senators argue there’s no stealing at all, just returning tax money paid by rural residents who shop in cities. That’s too simple. Many of those rural residents work in the cities. The cities provide infrastructure and other services that support retailers and their customers. The cities are the economic engines of the state. The legislature wants to use them as cash cows for the rest of North Carolina, but weakening them will have detrimental consequences.

… The House should revive the N.C. Competes Act, minus the sales-tax provisions. The state can’t build up sagging rural economies by robbing urban areas of tax revenues they’ve earned. That won’t make anyone richer.

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