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or Truth 
The John Locke Foundation
is a501(c)(3) nonprot, nonpartisan researchinstitute dedicated to improving public policy debate in North Carolina. Viewpoints expressed by authors do not necessarilyrefect those o the sta or board o the Locke Foundation.
200 W. Morgan, #200Raleigh, NC 27601
phone:
919-828-3876
fax:
919-821-5117www.johnlocke.org
regional
brief 
Does Wayne Need aSales-Tax Increase?
County already has $39.1 millionin available funds
D
r
. M
ichael
S
 anera 
, J
oSeph
c
oletti
, t
erry
S
toopS
 A 
pril
2008
No. 48
e
xecutive
S
uMMary
The Wayne County commissioners are asking county residents toapprove a sale-tax increase on May 6.This
 Regional Brief 
nds that Wayne County has no lack of funding.The $39.1 million in savings and revenues identied in this report is
almost 15 times the amount that the proposed sales-tax increase is
estimated to produce (see Figure 1). If the county used this moneyinstead, it could delay a sales-tax increase for almost 15 years.County revenues have grown 27 percent faster than populationand ination since Fiscal Year (FY) 2001 (see Figure 3). The totalamount of revenue for FY 2006 was $17.3 million more than inFY 2001. By FY 2006, the average family of four was paying $608more in taxes than in FY 2001. It would take a 44 percent increasein family income (current dollars) to match the increase in revenuesthat the county has received over the last ve years.
1
If Wayne County were to adjust its revenue stream for only popula
-
tion and ination increases, the county’s revenues would increase
32.2 percent over the next ten years.
2
 
 Wayne County’s cash reserves are 25.7 percent of its annual bud
-
get. The state requires all counties to have eight percent of their
•••••
The authors thank John Locke Foundation research intern Clint Atkins for his assistance with this report.
 
does wayne county need a sales-tax increase?regional brief
Figure 1. Wayne County Projected Revenue and Savings
budgets held in cash for emergencies, but
 Wayne County has 17.7 percent more thanthat minimum. This means that the countyhas almost $15 million in cash that it canspend on pressing needs. This representsnearly six times the amount that the pro-posed sales tax would raise. In other words,
the county could use this available cash forthe next six years instead of new sales-taxrevenue, which is estimated to be worthonly about $2.6 million per year. Based on
this item alone, the county does not need toincrease the sales tax. Wayne County schools are not under-
funded. Over the last ve years, studentpopulation has increased by only twopercent. Local spending, adjusted for ina
-
tion, has declined by four percent, but statespending adjusted for ination is up ninepercent and federal spending is up 20 per
-cent (see Figure 2).
If the school district has facility needs, thecounty commission and school board need
to show taxpayers how they would spendthe $36.3 million in state money provided
for capital improvements over the next ten
 years.
From FY 2004 to FY 2006, Wayne County
•••
gave $1.6 million in incentives to a fewselected private businesses.
3
This practice is
unfair to the hundreds of businesses in thecounty who are, at times, forced to competewith tax-subsidized businesses. Wayne County beneted from the Medic
-aid swap more than many North Carolinacounties. While 23 counties are receiving 
only the state’s promised “hold harmless”amount of $500,000 a year for ten years,
 Wayne County receives more than $2.7
million the rst full year and a total of 
almost $35.1 million over ten years (seeFigure 1).
B
 ackgrounD
In its 2007 session, the North Carolina Gen
-
eral Assembly relieved all counties of paying the portion of Medicaid expenses that hadbeen forced on counties, in exchange for thehalf-cent sales tax that the counties levied
to help pay those expenses.
4
In addition, thelegislature voted to give counties the optionto ask voters to approve new tax increases.
Options include increasing the sales tax byone-quarter cent, tripling the land-transfertax rate from 0.2 to 0.6 percent, or not hik 
-ing taxes at all. The legislature also required
•
Revenue Gains1 year10 years
Gain from Medicaid swap (FY 2008-09)$2,714,435$35,073,849Estimated school capital (Avg based on projections)$3,586,511$36,323,496
Potential Savings
Eliminate economic incentive giveaways (2004-2006 Avg)$533,333$5,333,330
Revenue Growth
Revenue in excess of population and inflation (FY2006)$17,325,846$173,258,455
 TOTAL$24,160,125$249,989,130Fund balance in excess of state requirement (FY 2007)$14,950,743$14,950,743
Potential extra availability$39,110,868 $264,939,873Revenue from Sales Tax Increase$2,627,075 $34,801,246
 
 
John locke foundationdoes wayne county need a sales-tax increase?
counties to put those tax increases to an advi-
sory vote of the people. If voters approved,county commissioners were allowed butnot required to increase taxes. If both taxincreases were on the same ballot and both
were approved, commissioners could impose
only one tax increase, not both.In November 2007, there were 27 coun
-
ties that put sales-tax or land-transfer taxincreases on the ballots for voter approval,and ve of those counties put both taxincreases on the ballots. Alexander Countypassed a sales-tax increase in January 2008. All told, there have already been 33 separate votes (16 over land-transfer tax increases and17 over sales-tax increases). Voters defeated27 of the 33 requests for tax increases. Vot
-
ers rejected all 16 of the land-transfer taxincreases and 11 of the sales-tax increases.
In the May 6 election, 24 counties have
put tax increases on the ballot, 20 propos
-
ing sales-tax increases and four proposing land-transfer tax increases. Six of the coun
-ties that saw tax increases voted down in
November are asking voters to vote again fora tax increase in May (Cumberland, Gates,Greene, Henderson, Hertford, and Moore).There is no limit to the number of times that
county commissioners can place a proposed
tax increase on the ballot, or how much taxmoney commissions can spend on public“education” campaigns requesting that voters
approve the tax increase.
p
uBlic
S
chool
S
penDing
5
By far, counties spend more money on public
education than on any other area. Total localgovernment spending in North Carolina
on public education was $2.68 billion — or$1,934 per pupil — for the 2006-07 school year. Nearly 25 percent of all expenditureson public schools come from local tax rev
-
enue. Given the amount of taxpayer moneyinvolved, sympathetic appeals for schoolfunding should not come at the expense of sound scal policy.County governments and school boardsshould hold expenditures of local tax dollars
Figure 2. Wayne County Student Population, Personnel, andSpending, 2002-07
Notes: ADM stands for Average Daily Membership of students. PPE stands forPer-Pupil Expenditures. All PPE gures have been adjusted for ination.
State PPE:+9%Federal PPE:+20%ExceptionalChildren: –3%LocalPPE: –4%TotalPersonnel:0%ADM: +2%
-5%0%5%10%15%20%25%
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