Policy Reports | 2009 Archive

Better information about North Carolina’s private schools is the first step toward persuading legislators and policymakers to increase educational options for North Carolina families. To this end, the John Locke Foundation conducted a survey of North Carolina’s private schools to gather and analyze data on private schools generally not available to the public. This policy report provides a descriptive overview of questionnaire results of North Carolina’s private schools, focusing on private school academics, students, personnel, finance, and attitudes toward school choice.

Because of their high costs, tiny benefits, and interference with property rights, North Carolina should not attempt to provide high-speed rail service. Instead, it should use its share of the $8 billion stimulus funds solely for incremental upgrades, such as safer grade crossings and signaling systems, that do not obligate state taxpayers to pay future operations and maintenance costs.

Quick facts:

• The City of Salisbury recently decided to build a $30 million fiber-optic cable system that will offer Internet, phone, and television service to Salisbury residents and businesses. The city is paying for this system with 20-year bonds.
• City officials promised subscription fees from 28 percent of city residents would cover the entire cost of the system.
• While fiber systems offer high speeds, many computer users favor laptop computers and are willing to trade lower speeds for the mobility of wireless Internet connections. Thus currently available wireless technology such as mobile broadband cards, Wi-Fi, and the rapidly growing WiMAX wireless technology could make it very difficult for the city to live up to its “paid by subscribers” promise, leaving property taxpayers to foot the bill.
• WiMAX technology works similarly to WiFi but can reach faster speeds, currently up to 10 mbps (million bits per second), and cover a greater distance, up to 30 miles. One WiMAX installation could cover the entire city of Salisbury.
• If the system cannot attract enough subscribers, city officials have stated that they will use an increase in property taxes of 9.5 cents per $100 valuation to fund the project.
• The average residential customer gains little from this system. Television and phone quality will not be appreciably better than private sector competitors, and the highest speeds available through fiber technology will come with a price tag too high for most residential subscribers.
• Who benefits? From the start, city officials have justified the investment by touting its economic development prospects. They hope it will bring in a younger, professional class as well as new businesses that require this type of service. If the city fails to attract the necessary number of subscribers, property taxpayers, many of whom cannot afford or do not need the system, will be left footing the bill for businesses.

Authors: Dr. Michael Sanera and Katie Bethune

Policymakers in the many local governments of North Carolina face a host of important challenges. This issue guide offers solutions to problems that confront North Carolinians at municipal and county levels. The common thread in these recommendations is freedom. By increasing individual freedom, local governments can foster the prosperity of all North Carolinians and keep open avenues to innovative solutions from enterprising citizens.

North Carolina’s system of taxation aggressively interferes with individual liberty and retards economic growth. It does this by using the tax system to reward some activities and penalize others; by placing multiple layers of taxation on saving, investment, and entrepreneurship; and by promoting forms of taxation, the best example being the corporate income tax, that are completely hidden from those who pay. Because taxation inherently interferes with both personal freedom and economic decision-making, policymakers need to be vigilant about not only how much revenue is being generated but also how those revenues are collected. Some types of taxation are more damaging to freedom and prosperity than others. It is quite clear that our current system has been developed without any attention to this fact and without an understanding of how socially damaging a poorly designed tax system can be. The cornerstones of North Carolina’s tax system are its income tax, which accounts for 54 percent of all taxes going into the state’s general fund, and the sales tax, which contributes 26 percent of the general fund revenues. The largest portion of the remaining 20 percent comes from the corporate income tax, which contributes about 7 percent of the total. Other sources of revenue include taxes on alcohol and tobacco, inheritance and gift taxes, insurance taxes, and non-tax revenues such as user fees. While all of these need overhaul and in some cases should be eliminated, the most damaging to North Carolina’s economy and to the liberty of its citizens are the personal and corporate income tax. Policymakers should begin to change the tax system with an eye toward the following long-term goals: • Replace the current progressive income tax with a flat rate “consumed income tax.” This would reduce the tax penalties against economic growth by making all saving and investment tax-deductible and would reduce tax discrimination by abolishing the current “progressive” rate structure. • Abolish the corporate income tax, which is a hidden tax on workers, consumers, and shareholders. • Eliminate all special tax breaks for new or existing businesses. The tax code should not subsidize some businesses at the expense of others. • Eliminate differential sales tax rates and special excise taxes. The state should not be penalizing the choices of some and rewarding the choices of others. Eliminate the sales tax on business purchases.

Quick facts:

• This report documents the change in locally generated revenues of 98 North Carolina counties* and the 30 largest N.C. cities between 2002 and 2007.
• Locally generated revenues increased faster than population and inflation in 96 of 98 counties and 24 of 30 cities. In Union County, revenue increased 48 percent faster than population and inflation over five years.
• For that reason, many counties and cities are having financial difficulties because they have spent taxpayer revenues on unnecessary or low-priority projects.
• In addition, the public has recognized that counties must live with in their means. Since 2007, voters have rejected tax increases 66 of the 74 times that county commissioners asked for a tax increase. That is almost 90 percent of the time.
• Furthermore, this report provides information that is an essential starting point for citizens to hold their elected and unelected officials accountable for their spending decisions.
• County and city officials must do more to put budget and revenue information on the Internet in easily accessible formats.

* The counties of Graham and Scotland failed to report revenue information for Fiscal Year 2007 to the State Treasurer’s Office. Authors: Joseph Coletti and Dr. Michael Sanera

County and municipal governments provide many key services while taking in billions of dollars in revenue. Their roles grow as state government keeps more local funding sources and shifts more taxing power to localities. Still, finding comparative data is hard. That's why this report provides information about how much local government costs in every city and county in North Carolina. Author: Michael Lowrey

The Avery County commissioners are asking county residents to approve a sale-tax increase on February 3. This report identifies over $10 million in revenue and savings the county could use to meet its needs — more than triple the amount that the proposed land-transfer tax increase is estimated to produce. Authors: Dr. Michael Sanera, Terry Stoops, and Joseph Coletti

Fast facts:

• The City of Wilson’s $28 million investment in a fiber-optic cable system for Internet, phone and television could be obsolete even before it is paid for, leaving city taxpayers and electric utility users to pay the balance on the 25-year bonds.
• City officials promised that fiber-optic cable users, not taxpayers, would pay the entire cost of the system, but WiMax wireless Internet technology is rapidly leapfrogging fiber-optic cable technology, making it obsolete. This would leave Wilson’s fiber-optic system at a competitive disadvantage because it would provide only television and phone service on this high-capacity system.
• WiMax wireless Internet technology is similar to WiFi systems except it can achieve at much faster speeds and greater distance, currently about 10 mbps (million bits per second) and 30 miles. At this distance, the entire city of Wilson could be covered by just one WiMax installation.
• Even if WiMax technology is delayed in reaching Wilson, the Wilson fiber-optic cable system is a bad idea.
• If the system fails to attract customers or becomes obsolete, the city has promised to pay the outstanding balance on the 25-year bonds by increasing property taxes and electric rates for all Wilson residents, even for those who don’t use the fiber-optic cable system.
• Most residential users do not benefit from the system: prices are not appreciably lower, the phone and TV quality are not significantly higher, and the high Internet speeds (100 mbps) are not needed and are too expensive ($300/month) for the average homeowner.
• Who benefits? City officials admitted from the start that the fiber-optic cable system was an economic development (corporate welfare) strategy to be used to attract new business. Thus, large business users benefit with deep discounts for the high-speed service at the expense of average residential consumers who pay market prices for a package of Internet, phone and television.

Authors: Dr. Michael Sanera, Katie Bethune