New tax option proves unpopular at N.C. ballot boxes
By Scott Nicholson
nicholson@wataugademocrat.com

The use of the ballot box to enact local-option taxes may be a tougher battle than originally believed, especially in launching new land-transfer taxes.

In the wake of North Carolina’s decision to fully fund the counties’ portion of Medicaid, the General Assembly granted the authority for counties to adopt new taxes.

The idea was to offer counties flexibility to offset potential shared revenues that could be withheld because of higher Medicaid costs.

The flexibility was endorsed by resolution of the Watauga County Board of Commissioners as well as supported by the North Carolina Association of County Commissioners.

However, the General Assembly imposed a restriction that any new local taxes would have to be approved by voters in a referendum.

After the first round of such proposals reaching the ballot, it’s clear that the new taxes are far from automatic.
Only five of 26 local-option tax measures passed on Nov. 6, as many counties hurried to get the revenue options before voters.

Counties have the option of enacting two different local taxes—an additional quarter-percent of sales tax or a four-tenths percent land transfer or deed tax.

Voters in Catawba, Martin, Pitt, Sampson and Surry counties Tuesday passed a local-option sales tax referendum.

Eleven counties had put the sales-tax increase before voters.

Another five had put both the sales tax and land-transfer tax before voters, with neither passing.

The first trial balloon for the land-transfer tax failed to hold air, as it was rejected in all 15 counties where it was put on the ballot. Todd McGee, communications director of the North Carolina Association of County Commissioners, said the result wasn’t too surprising, as counties only had two months to organize the referenda.

“There was a lot of noise coming out of the opposition,” McGee said, noting realty associations and anti-government advocates rallied to oppose the land-transfer tax, which is paid whenever property is sold.

Realtors depicted it as a new tax on homeowners, while some local governments in resort or second-home areas see the tax as a way to shift more of the revenue burden away from permanent residents.

Forty-eight counties raised property tax rates last year, covering nearly 70 percent of the state’s population. The NCACC believes the options will continue to reach ballots around the state because of rising infrastructure and educational needs.

“Our research has shown that many communities around the country who had a successful referendum to implement a land transfer tax had to take it to the voters more than once before it was approved,” said NCACC executive director David F. Thompson in a statement.

“County commissioners will continue to do what they feel is best for their communities and will continue to ask the citizens how they feel is the best way to pay for their needs.”

McGee said a number of other counties have already scheduled referenda for 2008, and the counties who were not successful this time could try again.

“This is not a one-shot deal,” he said, noting that a longer campaign would enable voters to have better information about the options, particularly when compared to the possibility of higher ad valorem property taxes.

The Watauga County commissioners have endorsed no specific new tax options but will likely discuss them during their annual budget planning session in the spring.