- Associated Press - Wednesday, July 16, 2014

RALEIGH, N.C. (AP) - North Carolina counties would be limited in the sales taxes they could charge in a bill that surfaced Wednesday in the Senate. The move could prevent voters in the state’s most populous county from deciding whether to raise their taxes further in November.

The Senate Finance Committee voted for a measure that would cap the local sales and use taxes a county can collect at 2.5 percent of the price of a good or service. That would mean the combined state and local sales tax would be limited to 7.25 percent, with exceptions for Durham and Orange counties, which are currently at 7.5 percent. The two counties already have approved a local tax for public transportation needs.

The combined tax is 6.75 percent in 73 of North Carolina’s 100 counties. The rest have approved higher rates through various voter referenda in recent years.

“This is really about leveling the playing field for all counties, and in many cases offering flexibility but at the same time protecting the taxpayer,” said Sen. Rick Gunn, R-Alamance, the chief proponent of the Senate version of a House measure originally designed to expand a targeted tax incentive for a large manufacturing plant.

The bill appears to conflict with a Mecklenburg County referendum this fall for an additional quarter-percent on its sales tax because the combined rate in the county, which contains Charlotte, is already 7.25 percent. Proceeds from the additional 0.25 percent would go largely to help pay for teacher raises.

The measure would allow all counties to ask voters to raise an optional public transportation tax by a half-penny. Currently, most counties are allowed to seek a quarter-cent.

There would also be created a new option for counties to seek a half-cent sales tax increase through a referendum, with proceeds for public education. But the cap would remain in effect and a county could not levy the tax while simultaneously charging the public transportation tax.

Representatives of the North Carolina Association of County Commissioners and the N.C. League of Municipalities told committee members they appreciated the attention to local revenues but raised concerns about details in the bill and suggested the issues be studied. Cities receive a portion of some local sales taxes.

The legislation, expected on the Senate floor Thursday, would also expand eligibility for the state’s Job Maintenance and Capital Development Fund to benefit a packaging company in Haywood County. The measure proposes the creation of a new Commerce Department incentives program to help local government land large manufacturing projects.

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