In Raleigh and Wake County, Taxes Are Going Up as the Legislature Offers Tax Cuts | Wake County | Indy Week
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In Raleigh and Wake County, Taxes Are Going Up as the Legislature Offers Tax Cuts 

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Taxes come at you from every corner, and this time of year governments at all levels are preparing to stick it to you—that is, to charge you the freight for living in a free society.

As legislators in Raleigh and Washington exhibit tax-cutting fever, city and county officials have hiked tax bills, in both cases for what many would describe as good causes. For the Wake County Board of Commissioners, allocations fed by tax increases will go to the schools, law enforcement, and other priorities. For Raleigh, increased revenue has gone or will go to parks, transportation, affordable housing, and pay raises for municipal employees.

On the state side, the General Assembly's GOP leadership on Monday announced a budget that will continue to cut personal and business income taxes over the next two years. But the reality is tax cuts at one level of government often translate to increases downhill. And the legislature doesn't yet know what's in store for North Carolina once the U.S. Congress takes its whack at federal income tax rates and cuts potentially hundreds of billions to pay for a revised health care plan. As part of the health care plan that's being written in secret by U.S. senators, steep cuts appear likely for Medicaid, a program that helps individuals with low incomes and disabilities access health care.

Wake budget planners, including those at the school system, know part of what's ahead for the fiscal year, which starts July 1, because the Board of Commissioners adopted a $1.26 billion budget Monday evening. County commissioners complained volubly about a shortfall in state funding for education as they cut more than half of the school board's request for $45 million in new funds to $21 million.

"We are handicapped in this state," said commissioner Erv Portman. "There is no question that public education is underfunded in this state."

School board member Jim Martin called the appropriation disappointing. "The big picture is that it's a status quo budget," Martin told the INDY. "It just meets growth and inflation. It's a subsistence budget."

When the Great Recession hit in 2008, state contributions to North Carolina public schools fell and have taken many years to recover. It wasn't until the 2015–16 school year that the state share provided to Wake schools exceeded $5,321 on a per-pupil basis, the level it had contributed in 2008–09.

Wake County Public Schools budgets for 2016–17 and 2017–18 show that state mandates or actions are requiring expenditures of $12 million in the current budget year and $16 million in the year to come. That includes a $6.8 million increase for charter school students, part of $32 million for this population Wake is obligated to pay under state law.

"We're not a taxing authority," says school board spokeswoman Lisa Luten. "When there's something that's not covered by the state, we put it in our budget and ask for it from the county commissioners."

As Republican lawmakers have steadily lowered state income and corporate tax rates, Wake leaders have generally agreed to pump up their own contributions to local government and schools. With Monday's budget, the county will have imposed four straight years of property taxes: 4.40 cents per $100 in property valuation in 2014–15, 3.65 cents in 2015–16, 1.35 cents in 2016–17, and the proposed 1.45 cents in the new fiscal year. (You can't add those up to get a cumulative increase because of the reappraisal of property that took place in 2016, after which rates had to be lowered to keep revenues neutral.)

On the city of Raleigh's side, taxes have gone up, too, partly through public referenda. The city property tax rose for the last three years, including an increase that voters approved. Another tax referendum, of 1.3 cents, is slated for a vote in October.

The Republicans have also replaced the state's graduated income tax, which once had a top rate of 7.75 percent, with a flat tax. From one point of view, the flat tax means treating everyone the same. From another, it amounts to giving small or nonexistent cuts to low-wage earners and hefty cuts to those at the top. House Speaker Tim Moore says the cuts have been a good idea.

"In 2008, under Democrat control of our state, a married taxpayer who filed jointly with their spouse and earned $50,000 a year in North Carolina paid $1,968 in total state income taxes," Moore wrote in a May essay in Forbes. "In 2017, under Republican control of North Carolina, the same taxpayer pays just $1,587 in state income taxes. An average North Carolina taxpayer—a teacher, perhaps—saved $381 on their income taxes this year compared to last decade."

After nine years of cuts, the couple Moore describes is taking home an extra $7.33 a week. That means they could alternate weeks ordering a Chick-fil-A grilled nuggets combo, with drink and side, at $7.24 (with state and Wake sales tax included).

The new budget cuts the flat personal income tax rate to 5.25 percent in 2019.

To make state tax cuts possible, legislators have whittled deep into local budgets. The changes can be low-profile but expensive, such as shifting the cost for outpatient care for county jail inmates to the county, at a cost to Wake in the next fiscal year of $2.3 million.

Some state budget changes will loom larger in years to come. State contributions to private school vouchers will increase from $44.8 million this year to $54.8 in 2019, according to budget documents released Monday. And budget planners call for the state contribution to the vouchers—which critics say drains money and motivated families from public schools—to triple to $134.8 million within a decade.

The proposed income tax cuts come in a fiscal environment in which state revenues are spilling over. GOP leaders plan to add $363.9 million to the state's rainy day fund, while Democrats will continue to make the case that the rainy day is here.

This article appeared in print with the headline "The Tax Man Cometh"

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