Who should get the sales tax? | Eastern North Carolina Now

    Publisher's Note: This article originally appeared in the Beaufort Observer.

    There's a debate taking place in Brunswick County that comes up from time to time (almost every budget season) in Beaufort County also. But the dynamics in Brunswick that seem to indicate that after all is said and done there will likely be more said than done is about the same scenario as plays out in Beaufort. But its and issue worth reviewing.

    Here the deal. In North Carolina whenever a buyer purchases something within a county they pay a sales tax. In Beaufort, the sales tax rate for most items is 6.75%. Of that amount, 4.75% goes to the state. The balance is distributed between the county and the municipalities within the county. If you ever wanted to see an example of just how complicated bureaucrats and politicians can made something then just read this description for how the sales tax is distributed. But we'll make it simple for the purposes of this discussion: The County Commission can distribute a portion of the local proceeds wither by population or by property valuation within the municipalities. Most counties use population. But although the choice of options is the county's the municipalities typically get the longer end of the straw. That is true in Beaufort County. It a considerable chunk of change.

    So whenever it comes up, the municipalities typically oppose distribution on the basis of tax value because the fare better if population is used.

    Click here to read about how this issue is playing out in Brunswick, and remember it next spring when Hood Richardson brings up the issue again in budget discussions. Hood always raises the issue but the majority of Beaufort's commissioners don't have the nerve to change it.

    Then, the next time you hear a municipal official complain about what the county is NOT doing that they think it should be doing remember that the municipality is benefitting from the county's generosity. Typically some Washington official will complain that the county does not give Washington any money for recreation. Belhaven has complained that the county ought to be giving them money for sewer services. It goes round and round and heretofor nothing much happens. But it plays good to the low-information crowd.

    Now, here's our take on it. We think all the sales tax should go to the county. The municipalities should be taken out of the sales tax business, just like they are excluded from the gasoline sales/use taxes.

    The reason is the same. The tax should benefit those who pay it more than those who pay less relatively.

    Let us use an example we can all probably relate to: Wal-Mart, Lowes and Golden Corral. All are located within the City of Washington. Many people who live in Washington (population) shop at these businesses. But so do people who live in the county outside of Washington. So when we go to Wal-Mart and spend a hundred dollars Wal-Mart collect $6.75. $4.75 goes to the state. The other $2.00 goes to the local governments. So what part of that should the people who live in Aurora get spent on them? The current law presumes that the answer should be determined by how many people live in Washington or how much the value of the Wal-Mart property is.

    We say both population and property values are irrelevant. The money should be spend for services the taxpayers paid. The only realistic to accomplish this is for the county to spend the money on county services.

    After all, there would be no Wal-Mart, no Lowe's and no Golden Corral in Washington is people from outside Washington did not shop there. Some might say that would be a good thing (not having Big Box stores) but that's another issue. We have them. They are there because these businesses assess "the market" and invested there because of people who live both inside Washington and outside Washington. Washington would not get anything if these businesses were not here and they would not be here without the people who live in the county.

    So yes, the "people in the county" do support the Washington Recreation Program. They also support many Washington services that they do not benefit from at all, such as the police, fire and EMS services. Or, to put it another way, if the sales taxes county residents pay did not go to the municipalities their county taxes could be reduced and the city taxpayers would then have to "pay their own freight."

    For those who study such esoteric matters, it is said that a Principle of Fair Taxation is that the "incidence" of a tax should fall on those who either use of benefit from the service it provides. Under that theory, it matters not whether the person who pays the 2 cent local sales tax is a resident a municipality or simply a county resident. The only practical way one can say the taxpayer who pays the tax should benefit from the payment of the tax is to have the local portion go to the county and used to relieve the "other" tax burdens of everyone in the county.

    But it is manifestly inequitable for part of the local sales tax to be distributed proportionately to municipalities when there is no real relationship between the use of that tax and who paid it.

    So once again we make our tax system inequitable because of politics, not rational fairness.