ROCKINGHAM — Local leaders are applauding a state Senate plan that changes how sales tax revenues are doled out.
According to Senate Republicans, the plan corrects “the state’s unfair system for allocating sales tax dollars,” returning to a system that had been in place prior to 2007 where 50 percent of sales tax revenues will be allocated based on where people live, with the remaining 50 percent allocated based on the county where a sale takes place.
“This is a game-changer for rural North Carolina,” said Sen. Tom McInnis, R-Richmond. “It will create a level playing field from Manteo to Murphy for the allocation of sales tax.”
Kenneth Robinette, chairman of the Richmond County Board of Commissioners, also called the plan a “game-changer” for the rural areas of the state, like Richmond.
Robinette said a contingent made up of representatives from the county, the city of Rockingham and the Richmond County Board of Education will be going to Raleigh on Wednesday to advocate for the plan.
“We’re all in full support of it,” he said. “We appreciate our representatives going to bat for rural North Carolina.”
Senate majority leader Harry Brown, R-Onslow, said the current system “forces North Carolinians from 83 counties to subsidize a select few, and this compromise will help all parts of the state.”
“We simply believe that when someone spends their hard-earned tax dollars, those dollars should provide more benefit to their own family and their own community,” he said in a statement.
Rockingham City Manager Monty Crump said the city — along with many other local governments — opposed the first proposal due to a projected loss in revenue.
“Shortly after the first proposal, a new one emerged that showed a significant increase in sales tax revenue which upon review appeared to me not to balance without producing either more revenue from a sales tax increase or expansion of sales tax levy,” he said. “I emailed Sen. McInnis to express that it appeared that the new projected sales tax revenue appeared unattainable without either an increase in or expansion of the statewide sales tax and I never got a response to clarify that assumption.”
Crump said he later learned that the second proposal did depend on new revenue by expanding the sales tax to services — including those performed by veternarians, accountants and barbers — and assumed an annual 3.5 percent annual growth rate, “which, quite frankly, is an ambitious assumed annual growth rate.”
He said the latest plan would give most local governments an increase in sales tax but at less impact to the larger counties, meaning also less of an increase to rural local governments.
“The city, of course, supports any proposal to increase the sales tax revenue to local governments,” he said. “And I believe that there is justification to do that because all across the state, rural residents travel to and spend money for goods in larger counties that have more retail offerings.”
The sales tax proposal is part of House Bill 117, the N.C. Competes Act, which includes several economic development initiatives.
The original bipartisan bill passed its third reading in the House by an 88-29 vote March 5. Rep. Ken Goodman, D-Richmond, signed on as a co-sponsor, and his N.C. Main Street Democrats Legislative Caucus actively lobbied for its passage.
Reach reporter William R. Toler at 910-817-2675 and follow him on Twitter @William_r_Toler.