Legislation has returned that would cause the larger counties and cities to subsidize the smaller municipalities through increased sales tax redistribution. If this legislation were to pass, the City of Charlotte would lose nearly $3 million annually.

Background on Redistribution

Four years ago, Senate Majority Leader Harry Brown introduced a sales tax proposal to change how revenues would be distributed among North Carolina counties. This proposal was created with the intent of raising more money for areas of the state that have not experienced the same benefits as larger counties due to the fact that they are smaller and more rural. The proposal would have split the revenues with half of it staying in the county where the sale itself took place and the other half being distributed based on county population equations. Due to the negative financial impacts of this proposal towards urban counties, this bill did not pass - Charlotte would have expected to see $5 million in lost revenues from the 2015 version of this bill.

Senate Bill 650

On April 3, 2019, Senate Bill 650, also introduced by Senator Brown as well as Senator Hise, was filed. Created to simplify North Carolina’s local sales tax distribution, this proposal affects how the three core sales and use taxes are distributed among cities and counties in North Carolina. The four major aspects of this bill are how it moves the distribution of these revenues from a 75% point of collection and 25% per capita to a 50% point of collection and 50% per capita as well as eliminates adjustment factors. This bill would also eliminate the redistribution of the 2015 sales tax expansion to rural counties and update the food sales tax distribution. Senate Bill 650 is largely different from the proposal four years prior due to the fact that lost revenues would accumulate to around $2.8 million, which is substantially less than before.

If this bill were to pass, this proposal would be phased in over four years starting in 2021’s fiscal year. It is currently in the legislative process and as of today it is being reviewed in the Finance Committee.

Content Authored By: Kristina Beek