Counties seek revenue. But not here.

Eleven N.C. counties will ask voters in November to let them impose a new, quarter-cent sales tax. The N.C. legislature in 2007 gave counties a blanket to add the tax if county voters OK'd it. In a 12th county, Watauga County (home of Boone) voters yesterday rejected the idea, apparently with some help from the John Locke Foundation.

While quarter-cent sales tax votes have had mixed results for the last three years, interestingly, seven of nine counties that have already voted this year passed it. (In addition to Watauga, Davie County voters in February, nixed it.) Here's a rundown from the N.C. Association of County Commissioners.

The measures had a generally mixed record in 2007 and early in 2008. None of the ones on the ballot in November 2008 passed – remember, the financial world had just collapsed.

Harnett County (home to Lillington - corrected 1:51 p.m.) is even going for a third try this November. Well, hey, the third time (last May) was the charm for Onslow County (home to Jacksonville. N.C.).

The 2007 legislation also offered counties the option to impose a land transfer tax – paid when a home is sold – if voters OK it. Of course, the state's Realtors erupted like Mount St. Helens when that one passed the legislature. A number of counties put it on the ballot right away, without taking time to build community support. Not surprisingly, given the hot opposition from Realtors and developers, none of the land transfer tax measures to date has passed.

Mecklenburg hasn't opted to try either one, though it has eviscerated its public library system and its county park and recreation budget, and county cuts played a role (state budget cuts did, ) in massive public school teacher and staff layoffs this year and last. Whether the local pols disinclination to put either option on the ballot is a result of sticking a finger into the political winds, or sane tax policy, or is a response to pressure from Realtors, to whom our politicians pay close heed – I'll let you take your pick of those options.

In general, compared to property taxes, sales taxes go down easier with voters, although economists tend to point out that compared to property taxes they're more regressive and less stable. But usually you pay sales taxes in small amounts, so people don't notice them as much as those big propery tax bills.

Without tax reform, is NC bond rating at risk?

State Treasurer Janet Cowell, speaking Wednesday night to the annual dinner for the Centralina (NOT Metrolina) Council of Governments, said something that perked up my ears considerably.

She said, in response to a question from Belmont Mayor Richard Boyce, asking what the role of the state treasurer is in comprehensive tax reform:

Cowell said that in talks with bond rating agencies N.C. officials were told that they want the state to reform its tax structure, so it's more stable. Without reform, she said, we could be put on a watch list. Cowell says she told this to N.C. Senate Majority Leader Martin Nesbitt, D-Buncombe. "I don't think we have the luxury of doing nothing," she said.

Here's why this should be of interest to more than just tax policy geeks (I plead guilty to being one). The state's revenue system, which depends primarily on income taxes and sales taxes, was set up in the Depression. It doesn't recognize the many economic changes that have taken place in the 80 years since then - the loss of manufacturing, the rise in the service economy, the explosion of online commerce (most of it untaxed). The sales tax is among the most volatile of taxes, fluctuating greatly when times are good, or bad. Income taxes are less volatile but still show big dips and surges depending on the economy's strength. (Update: 4:45 PM - State Sen. Dan Clodfelter tells me that the problem in North Carolina is that income tax revenue is more volatile than sales tax. "The single most volatile, unpredictable, unreliable tax is the corporate income tax, and that fact has nothing to do with exemptions, loopholes, concessions, or anything of that ilk," he e-mailed me. He's a major mover pushing for tax reform and wants to do away with the corporate income tax.)

The state keeps going to those same buckets - sales taxes on goods, and income taxes. A tax reform proposal in the legislature would lower the general sales tax rate but extend the sale tax to some - not all - services. It would do other stuff, such as tinker with business privilege license taxes - which has alarmed the folks at the city of Charlotte, which gets about $16.6 million a year from that little revenue stream.

The upshot of all this is that many states have attempted comprehensive tax reform and few have succeeded. Every business with a loophole fights like mad to keep it. Because the reform would raise some taxes and lower others, some of the "I'm anti-tax" blowhards take up sloganeering against it on grounds that it raises taxes, carefully neglecting to mention that some taxes go down (like, say, the overall sales tax rate).

But for Cowell to weigh in with the specter of bond rating repercussions does imply that folks in the power offices in Raleigh are taking this reform effort seriously. Or at least, that they ought to.

(And if you're still with me here, you are clearly a tax policy geek, too, in which case you'll enjoy the latest State of the States 2010 report from the Pew Center on the States.)

Transit update from the Triangle

Interesting e-mail exchange a few days ago with Brad Schulz, communications officer for Triangle Transit, about what happens next in the places that won permission from the General Assembly to hold votes on adding a sales tax for transit. Schulz was a longtime broadcast journalist in Charlotte, mostly for WBT radio, who left to work for CATS 2000-2003 and joined Triangle Transit in the Research Triangle Park in 2003.

The new law says large counties can put a half-cent sales tax to a vote of the people; smaller ones get the option for a vote on a quarter-cent sales tax. County commissioners would have to decide to put the issue on the county ballot. And I haven't met a politician yet who thinks this year is a good one to take such a question before the voters – especially after the legislature recently popped a 1-cent sales tax increase on us to balance the state budget. But longer term, who knows?

Schulz wrote me, "It’ll be up to commissioners in Wake, Orange and Durham counties to call for a referend(um) (a) when they feel the time is right economically and when each county has a transit plan they feel adequate to answer future needs. ... Triangle Transit is assisting the counties with financial modeling right now on what sales taxes could be raised with a ½ cent and what the counties could provide in ramped-up bus service (much like CATS did) as it planned for light rail.

"The sales taxes would go for bus and rail improvements in the 2015-2025-2030 time frame for construction/completion (remember if you’re going in the federal queue [for funding] it usually takes 10-12 years from plan/design/construct/opening.

"BTW… it doesn’t take all three counties moving in tandem to begin bus and rail improvements. If one or two said yes and the other/others said no, we could still move forward with planning for that county.

But, one caveat is that all of the county plans should also fold into a rational regional transit plan that would one day allow us to connect Chapel Hill with North Raleigh with 51 miles of rail. Light rail is the preferred mode, instead of the diesel units we looked at before, for energy/fossil fuel/environmental-sustainability reasons.

A 29-member citizens commission reported out last spring that the region should be ready to go it alone if there were no federal funds available. The bill as passed ... would allow for 25% state funding – with that precedent set by NCDOT with the CATS Lynx South Corridor Project.

" ... Chances are that the Chambers (of Commerce) would be leading the charge for the ½ cent sales tax along with the business community. BTW… the owners and tenants association of the Research Triangle Park also agreed to raise their taxes in the park to help pay for transit improvements. "

About that 'new' transit tax ...

You'll remember the taken-out-of-context flap earlier this year about whether the N.C. legislature should add Mecklenburg to a bill that would let all the other N.C. counties ask their voters whether they wanted to levy a small sales tax to support transit.

Plenty of local blowhards both in local news media and elsewhere acted as if the request to be included was the same as actually imposing a higher tax. That, of course, was either deliberate mischaracterization or, to be kinder, incredibly sloppy reporting. The bill lets voters (in other counties) decide whether to tax themselves.

Anyway, it seems the bill (House Bill 148, which does not include Mecklenburg) is about to pass the legislature (it's on tonight's calendar), giving counties in the Triangle (Raleigh-Durham-Chapel Hill) and the Triad (Greensboro, High Point and Winston-Salem) a go-ahead, if they wish, to seek voter approval for a half-cent sales tax for transit systems there. All other counties (except Mecklenburg) can seek voter OK for a quarter-cent sales tax increase.

This is mostly good news, although transit supporters in Mecklenburg had wanted to be included. They wanted to have a tool in the toolkit of transit-funding options so they wouldn't have to expend the time and effort to do what Mecklenburg did in the 1990s: get a special, local bill giving us the authority for a 1998 transit tax referendum. Mecklenburgers still could seek such a special bill from the General Assembly if they wanted to.

The good news is that surrounding counties such as Cabarrus and Iredell are now free to seek local taxing approval if they want to extend the proposed Northeast or North transit corridors beyond Mecklenburg's borders.

Here's a summary from Boyd Cauble, the executive assistant to City Manager Curt Walton, sent to City Council last Friday. (I tried for a link to his memo but couldn't manage it. If anyone can find the thing online, please share the link.)

Intermodal Transit Tax
The House passed a transit funding bill (H148) in April and some questioned whether the bill would be approved by the Senate. Last Wednesday, the Senate voted 37-9 to allow the Triad and the Triangle to have the ½ cent sales tax authority for transit which Mecklenburg currently has. Additionally, H148 allows every other county in N.C., except Mecklenburg, to levy a ¼ cent tax for transit upon voter approval.

The Triangle area did an excellent job of soliciting support from over 100 separate groups and a cross section of bipartisan support in the legislature. Prior to the Senate vote, Senator [Malcolm] Graham and Senator [Charlie] Dannelly [both Mecklenburg Democrats] explored ways to honor the MTC [Metropolitan Transit Commission] and City Council’s request to include Mecklenburg in H148. Unfortunately, adding an additional taxing authority in the bill would have been considered a "material amendment" requiring five additional days for approval. The amendment alternative was abandoned because it would have jeopardized the bill’s passage this session.

Not joining the other 99 counties in getting additional voter authority to fund future transit is very disappointing, but it is comforting to know that now Cabarrus, Iredell, and other adjoining counties have the authority to fund extensions of Mecklenburg’s transit corridors.
Representative [Becky] Carney [Mecklenburg Democrat], H148 primary sponsor, said she has the support of her colleagues to push for Mecklenburg inclusion for additional funding in the future, if local transit supporters and elected officials get behind the movement.