Since 2007, North Carolina has used a three-level system for designating county development tiers. The designations, which are mandated by state law, determine a variety of state funding opportunities to assist in economic development. The North Carolina Department of Commerce annually ranks the state’s 100 counties based on economic well-being and assigns each a Tier designation.
Macon County’s Tier Designation improved from Tier 2 to Tier 3 — meaning Macon County’s economy is among the top in the state. The county’s economic distress rank is #84 (it was #72 in 2020). Compared to last year, the county’s population growth rank, median household income rank, and unemployment rate rank all improved.
There are only 20 Tier 3 counties in the state. Macon County is the only county in the Westernmost portions of the state to be recognized as a Tier 3 county. Further east, the next Tier 3 counties are Transylvania, Henderson, and Polk with the remaining counties in the Eastern portion of the state.
The 40 most distressed counties are designated as Tier 1, the next 40 as Tier 2 and the 20 least distressed as Tier 3. County Tiers are calculated using four factors:
Average unemployment rate
Median household income
Percentage growth in population
Adjusted property tax base per capita
Beginning with the 2019 rankings, only these four factors determine final Tier rank. In previous years, additional ‘adjustment factors’ such as overall poverty rates were also considered in the calculations. In 2018, the North Carolina General Assembly eliminated these adjustment factors from the Tier ranking methodology.
Macon County Economic Development Director Tommy Jenkins explained to commissioners that the change in ranking is positive, as it indicates that the county’s economy is improving over the previous years, however, it can present challenges as some funding opportunities will no longer be available. Certain state programs and funding opportunities are only available to tier 1 and 2 counties, meaning Macon County’s shift to Tier 3 could affect its participation in some current or future programs.
“Funding opportunities like the building reuse grants which we have seen make a big difference in Macon will no longer be available,” said Jenkins. “So while it is good to be considered amongst the top economically well-off counties, it presents some challenges as well.”
A total of 22 counties in North Carolina will see a change in tier designation in 2021. Along with Macon County, Beaufort, Camden, Carteret, Chowan, Jones, Onslow, Perquimans, Pitt, Polk, and Transylvania improved their tier designation. Alexander, Brunswick, Buncombe, Burke, Cherokee, Davie, Haywood, Hoke, New Hanover, Randolph, and Rowan Counties saw their tier designation change to a more distressed tier.
North Carolina’s primary source of tax revenue is personal income tax. NC has had a flat income tax rate of 5.25% since its 2013 tax reform. In 2018, voters backed an amendment to the constitution to cap the maximum allowable income tax rate at 7%, down from 10%. Historically, the rate has gone as high as 8.25%. The state’s property taxes on average are lower than the national average.
Tax source breakdown for North Carolina.
– Personal income tax: 45.2%
– General sales tax: 28.9%
– Selective sales tax: 14.8%
– Licenses tax: 7.9%
– Corporate tax: 2.9%
– Severance tax: 0%
– Property tax: 0%
– Other taxes: 0.3%
North Carolina runs on a fiscal year of July1-June 30, meaning tax collections for a fiscal year occur within that time frame, not the calendar months of January-December. On August 20, 2020, the North Carolina Department of Revenue released state sales and use tax statistics for the 2019-2020 fiscal year which was July 1, 2019 to June 30, 2020, which includes March-June of the COVID19 Pandemic.
For the 2019-2020 fiscal year, Macon County collected $27,258,212 in-state sales tax. That figure does not include local county or town taxes collected. The taxable sales and purchases for Macon County during the time frame was reported as being $571,501,972.
Across the entire state, the grand total of sales tax collected during that time was $9,019,490,953 and the total taxable sales and purchases for the state was $159,749,960,253.
For the 2018-2019 fiscal year, which ran July 1, 2018 to June 30, 2019, Macon County’s gross collections were reported to be $26,595,070, which is $663,142 less than the 2019-2020 year, which included the pandemic months. The total taxable sales and purchases for 2018-2019 in Macon were $556,469,301.
North Carolina as a whole collected $8,931,811,911 in total sales tax with a total taxable sales and purchases amount being $156,558,876,013.
NCDOR further breaks down the industries that collected the sales tax to Apparel, Automotive, Food, Furniture, General merchandise, lumber and building material, and unclassified. Macon County collected more sales tax in all categories in 2019-2020 compared to 2018-2019 with the exception of furniture and food, which saw less than a $100,000 decrease in revenues collected.
In the four years that Governor Roy Cooper has served in office, Macon County’s gross collections and taxable sales each increased. Gross collections increased by $1 million and taxable sales have increased by about $100 million. During the same time frame, North Carolina’s sales tax revenue as a whole has increased by $1,452,771,490 with the taxable sales increasing by $31,583,113,634.
While state sales tax is recorded with the NCDOR, local governments also collect sales tax. According to North Carolina’s Association of County Commissioners, with the exertion of June, July, and August, North Carolina’s sales tax distributions are at a 5 year all-time high. The local sales distributions in June, July, and August, would reflect sales tax collections in the months prior, which coincide with the temporary shutdown of businesses in March, April, and May.
North Carolina local governments received slightly more than $355 million in sales tax distributions in October, a 10 percent increase statewide compared to last year and the second monthly increase in a row following three months of statewide decline. October distributions reflect July sales, when the state was fully in the Phase 2 reopening plan, having transitioned in May.
While not all local governments in North Carolina experienced an increase in October, the general statewide gain was also consistent with trends in several other states. At first review of the figures, while some counties do not reflect an increase in distributions in October, the growth represents $33 million more statewide compared to the same month last year. The year-over-year increase between October 2018 and 2019 was 15 percent.
In addition to sales tax collections, unemployment rates are indicators used to measure economic stability. North Carolina reported an unemployment rate of 6.5% in August, down from 8.5% in July (and compared to 3.8% in August of last year). August’s rate was down from the reported high of almost 13% in both April and May. The national rate was 8.4% in August. The industries reporting the largest decreases in employment over the past year include Leisure & Hospitality Services, Manufacturing, Information Services, and Education & Health Services.