NC legislation threatens Durham’s budget

The legislature is in session, and the biggest potential issue for Durham so far is SB369, which was introduced yesterday under the delightfully euphemistic “Sales Tax Fairness Act” title.

Currently, a portion of the state sales tax ($.02 per dollar) is earmarked for “local” spending. Of that, 75% ($.015 per dollar) is allocated directly to the county where the tax was collected, while 25% ($.005) is distributed across the state to counties based on their population.

SB369 aims to change this by treating all $.02 per dollar the same, and allocating it purely per capita with no funds earmarked for the location in which they were raised. This would effectively redistribute money from the cities (who raise much more sales tax revenue per capita) to rural counties. According to WRAL, this will result in a 9% hit to Durham County’s annual revenue.

From what I’ve read so far, this bill has a tough road to hoe due to some potential opposition from the house. Even though the primary goal is to take money away from big cities, it also nails rural tourist destinations like Dare County, so expect some interesting allies on this one.

This potential change follows a hit already poised to take effect in July: last year’s law which removed the ability of cities to collect “privilege license” taxes. According to the Herald, the city is already poised to lose $5.7M due to that legislation.

How will cities make up for the lost revenue? There aren’t many tools at their disposal, so you can probably expect property tax increases to help compensate for these gaps in the future.

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