GFOA is working with some other stakeholders on a project called “Rethinking Local Government Revenue Systems.” Here are links to Part 1 and Part 2 of the published work.
The arguments in these articles will be familiar to many: our government revenue systems reflect the economies in which they first arose, and our economy today is different. Real property ownership is no longer the indicator of wealth it once was, for example, and similarly consumption of goods (subject to sales taxes), as opposed to services, is no longer the same indicator of income. The articles also talk about traditional measures of a “good” system – such as fairness, transparency and efficiency – and how our current systems are increasingly deviating from those measures.
We could use a broad discussion of local government revenue sources in North Carolina. As the challenges facing our local governments keep growing — and getting bigger in different ways, in different places – a rethinking of the funding approach could help localities better respond to their individual needs.
Will we continue to fund local government primarily through the local property tax and a sales tax predominantly on goods? Or, can we broaden the base by taxing financial and other assets, and extending sales taxes to a broader range of services? What’s the proper balance of user fees and taxes? While “fair” and “equitable” can mean different things to different people, our local governments are limited to increasingly regressive revenue-generating tools. There will be winners and losers from any change in the process, of course just as there are winners and losers under the current system. But we can do better.
Maybe the bigger question, though, is how we will ever have a meaningful, useful discussion about reforming North Carolina’s local government revenue system. Right now, it seems impossible to even contemplate a broad policy discussion on this topic. We’re stuck – and that’s too bad.
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