“Sales tax is due tomorrow. Will you please remind me to pay it?”
“I will try. Can you write yourself a note?” Jock asked.
I nodded and jotted a reminder with a Sharpie on my left hand—my palm pilot! “I am, but can you also, please, remind me?”
As a business owner, it’s a monthly crisis trying to remember due dates for sales taxes. The flip side is how we talk about sales tax at the bookstore: If someone comes in and makes a $10 purchase, at some point we would say, “And the governor needs $0.70, making the grand total $10.70.”
Last week, Live Local took a look at the history of taxes and for what federal taxes pay. Of course, we also pay taxes to the state and our municipalities.
According to Roby B. Sawyers at NC State University, North Carolina relied primarily on property taxes to fund the state treasury until the early 1920s. In 1921, the “General Assembly enacted a state personal income tax, corporate income tax and gas tax, and the property tax became strictly a local-level tax.”
NC’s current personal income tax rate is 5.75 percent, the corporate tax rate is 6.9 percent, and the gas tax is 35 cents per gallon. According to the NC Department of Revenue: “In Fiscal Year 2010-11, North Carolina collected approximately $1,092 million in corporate income taxes.”
Sawyers goes on to state that in the beginning of the Great Depression, the state took on more responsibility for schools, highways and prisons. Therefore, they needed more means of revenue from varied sources. It wasn’t until 1933 NC became the second state nationwide to require a sales tax.
So let’s talk a little about sales tax. The state’s sales tax rate is 4.75 percent. New Hanover County’s sales tax is 2.25 percent, which combines to make 7 percent. Therefore, if customers spend $10 and pay $0.70, the store that collects the tax remits it to the state. Eventually, the state sends $0.225 back to New Hanover County. The NC Department of Revenue tells us, “For Fiscal Year 2010-11, sales and use tax receipts net of refunds and transfers to local governments were approximately $6.2 billion.”
The state budget funds a multitude of programs: education from elementary through college (the UNC system, community colleges), health care, transportation—state roads, bridges, etc.—prisons, probation, public employees, economic development (film anyone?), environmental preservation and regulation, state parks, state police, and housing. It also has a strange relationship with the county and city governments; there is considerable interplay between the three entities.
Education is a great place to see this complex relationship. Education is administered on a county level, but a considerable amount of the funding (and regulation) comes from the state. For example, according to the National Education Association, North Carolina spent $8,620 per student in the 2014-15 school year. That puts us at 46 out of 50 states in education funding. When $8,620 is divided by 180 days of the school year, it equals $47.88 spent by the state of North Carolina per day on each student.
It’s an interesting time to discuss the state’s tax system. Since the McCrory administration took office, some of the most sweeping changes to the tax code in memory have been enacted in our state. Senior citizens and people with the least income and available savings have seen their taxes rise, while the wealthy have benefited from lower taxes. Part of Moral Mondays’ platform has sought to address this disparity. It is not a new situation in NC. Land and property taxes in colonial North Carolina were applied in an erratic way that favored large plantation owners over small farmers. But, in our modern world, it is still a bit shocking to see disparity of this nature.
Anyone who owns real estate in New Hanover County has the privilege of paying property taxes. On the back of the bill, the county has printed a handy-dandy pie chart of how county tax money is spent. Surprisingly, at 28 percent, education gets the largest piece of the pie. Next comes human services at 19 percent, public safety at 18 percent, general government at 12 percent, education debt at 12 percent, debt service at 5 percent, cultural and recreational at 4 percent, economic and physical development at 1 percent, and transfers at 1 percent.
The county is funded through the above mentioned property tax, 2.25 percent of the sales tax, and through a variety of licenses and fees, all collected here. When I read through it last fall I was (pleasantly) surprised to see education got the biggest piece of the pie. Also, I was a little stumped: Why then do our schools still lack resources? Of all the things property tax can be spent on, investing in our future through educating the next generation seems like the most wonderful option available—certainly way more interesting than debt service, which is probably important, but not anything to get excited about.
Even for people who don’t own real estate, they still pay some sort of property tax as a private citizen: vehicles, boats, pets, etc. Business owners pay even more taxes and fees, all of which can be incredibly confusing to understand.
For instance, I get to pay a fee for the annual fire department inspection at the bookstore. Yep, they come by to see us, and then a couple of weeks later we get a bill in the mail. Again, fire safety is part of what customers pay for when purchasing items/services from a small business. Then again, having a fire sweep through downtown Wilmington would be devastating, n’est-ce pas? Besides the potential loss of life and property, we could never recover the history that would disappear.
Even with a great accountant, the city and county fees and licensing schedule is a maze. My father spent days frustrated and stressed out about it. “Trust me, these people are good at sending bills,” I would respond. “If we don’t figure it out immediately, they will let us know!” And just when business owners think they are caught up on all the fees, licensing, and assorted miscellaneous bits of money owed to the state, county and city, another envelope arrives in the mail.
It is odd how intertwined the worlds of the state, county and city are and especially in understanding how hard edged the lines can be of who is financially responsible for what.
One of my favorite experiences came from serving on the City of Wilmington Tree Advisory Board in the early 2000s. Invariably, we would be in the midst of discussing a possible project when city staff would point out that the street we were talking about was a NCDOT street, meaning the NC Department of Transportation is financially responsible for maintaining the road. More so, the city cannot just waltz in and do whatever it wants. Trees aside, jurisdiction will win. It felt demoralizing when all I wanted to do was make sure trees get planted. But responsible spending of our tax money is one of the responsibilities of our government staffs, so one can’t fault them for doing what we have asked of them.
That having been said, our community can always use more trees.