Senate Sales Tax Redistribution Plan Would Negatively Impact Dare County and the Town of Duck

Duck, NC – The sales tax redistribution proposal presented by Senator Harry Brown (R-District 6) is now a part of the Senate’s proposed budget.  If approved, it would have a significant, negative impact on Dare County and the Town of Duck.

The redistribution proposal calls for sales tax to be redistributed based on population.  The proposed change of sales tax collected by Dare County would increase from 78% of what’s collected going back to the state, to 94% of sales tax dollars being returned to the state for redistribution.  Dare County is already a sales tax donor county, giving back more than $80 million over the last ten years.

The redistribution proposal was created to distribute funding to less prosperous areas, however, rather than finding viable solutions which could allow the state to assist in the creation of jobs and improve infrastructure in these areas, the proposal would take hundreds of millions of dollars from North Carolina’s economic trade centers and tourist-based economies, including Dare County and communities like Duck.

Should the sales tax be redistributed to counties based on population as Brown’s proposal calls for, the Town of Duck, which has 400 full-time residents, would be critically impacted.  The recorded full-time resident population does not take into account the seasonal influx to 25,000 people.  The Town’s seasonal increase generates the sales tax revenues that help pay for the added fire, police, EMS, surf rescue, water, trash, etc. required for a population that large.  Dare County, along with Duck and neighboring towns, have invested and continue to invest in infrastructure and services to insure that this tourism economy can continue to be maintained and prosper.

Dare County has stated that an almost 25% increase in ad valorem rates would be needed to replace the lost revenue under the proposed sales tax redistribution plan.  The Town of Duck will also need an increase of 19% to 34% in ad valorem tax rates to

replace lost revenue in the Town. The combined town and county increase in ad valorem taxes would be 23% to 28%, which would increase the average tax levy in Duck by $858 to $1,029.

The potential loss of sales tax revenue for the Town of Duck is 7% to 14% of Duck’s General Fund operating budget and more than 12% of Dare County’s entire General Fund operating budget.  For perspective on this loss, Town Manager Chris Layton said that the loss of revenue is greater than:

  • 50% to 100% of the Town of Duck’s Fire Department budget
  • 50% to 100% of the Town of Duck’s Police Department budget
  • 49% to 100% of the Town of Duck’s solid waste and recycling budget.

It has been argued that Dare County and the Town of Duck have a low ad valorem rate and therefore have “tax capacity” to absorb the large sales tax cuts proposed.  While it is true that Dare County and the Town of Duck have low ad valorem rates of $.43 and $.21, respectively, Dare County and the Town of Duck have among the highest property values in the state.  As a result, Dare County is a “high value, low rate” county, where other counties are “high rate, low value” counties.  The result: Dare County taxpayers, including Town of Duck taxpayers, pay the same or more in property taxes as other North Carolina citizens.

To illustrate, the following are examples on the tax impact on a 1500 square foot house in two counties that would receive an influx of revenue under the Senate’s tax plan versus Dare County:

County                       Value                         Tax Rate                             Amount of Tax Due

Richmond                    $79,230                                       .81                                     $641

Nash                            $110,500                                     .67                                        $740

Dare                            $239,000                                     .43                                       $1,029

 

Taking this comparison one step further, we’ll look at the tax impact of a 1500 square foot house in towns within the counties:

Town                             Dobbin Heights                 Bailey                                Duck

County                          Richmond                           Nash                                  Dare

Value                             $79,230                            $110,500                            $400,500

County Tax Rate        .81                                        .67                                       .42

Town Tax Rate           .50                            .66 (.61 + .05 for fire)                 .21

Amount of Tax Due  $1,038                                $1,470                                $2,563

 

The net result of these comparisons is that Dare County and Town of Duck property owners already pay ad valorem taxes in amounts equal to or greater than other counties in the state and do not have the capacity to absorb the sales tax reimbursement cuts proposed by the Senate.

Arguments in favor of the redistribution proposal argue that rural counties with low sales tax revenues suffer because their residents shop in adjoining counties and therefore the rural areas deserve to be compensated.  This theory does not account for the infrastructure and service investments and demands that are necessary to maintain economic development activity in these areas. Subsequently, sales tax revenues are a major source of funding for these investments.  Additionally, due to the location of the Town of Duck and communities along the Outer Banks in Dare County, the bulk of sales tax revenue comes from out of state visitors.  Lastly, if revenues are not found to replace the loss in sales tax revenue, the economic engines will be unable to invest in the very things that allowed them to generate the sales tax in the first place.

The North Carolina House and Senate budget conference committee is meeting to iron out differences in their proposed budgets.  The appointed committee is made up of Senators and Representatives chosen by their leadership.

Duck Town Council encourages all citizens and those who own property in the Town of Duck or Dare County, are encouraged to call or email state legislators and budget conferees to encourage them to take a stand against the proposed sales tax redistribution plan.  Contact information is available below, and at www.ncleg.net.

The list of House Budget Conferees is available at
http://www.ncleg.net/sessions/2015/budget/2015/HouseBudgetConferees.pdf

The list of Senate Budget Conferees is available at
http://www.ncleg.net/gascripts/confcomm/confcommittee.pl?BillChamber=H&BillID=97&session=2015

For more information on the Town of Duck, visit www.townofduck.com or call 252.255.1234.