A sensible policy
Expect the phrase revenue neutral to be used often as local governments put together their budgets for the coming 2018-2019 fiscal year. After all, Beaufort County is experiencing the revalution of property.
In North Carolina, a county must conduct the revaluation process at least every eight years, but some counties go through the revaluation process more often than every eight years.
Simply put, a revenue-neutral policy is a taxing method that allows a government — local, state or federal — to receive the amount of tax revenue despite changes in tax rates. The government may lower taxes for a specific group of taxpayers and/or increase taxes for another specific group of taxpayers. This allows the overall revenue the government takes in to remain unchanged, or neutral.
Of course, not every property owner’s new tax bill is revenue neutral. Some property owners will see their taxes increase, others will see their taxes decrease and some property owners will see their taxes remain about the same. That’s because some types of property go up in value, while other property types decrease in value.
Recently, Washington City Council member Doug Mercer addressed the revenue-neutral issue. “One of the things that concerns me if property values increase in the city, which I think they will do, and you keep the same tax rate, that provides a windfall to the city. I don’t think we should have that significant a windfall based on the fact that the property is re-evaluated,” Mercer said. “If my house goes from $100,000 to $125,000, I would hope that next year I would pay the same rate of money that I paid this year.”
Most, if not all, property owners would agree.
The following is an example of a revenue-neutral property-tax scenario. If a homeowner owns a house valued at $100,000 and the property tax rate is 50 cents per $100 valuation, that homeowner pays an annual tax of $500. If the value of that house increases to $125,000, the homeowner would pay $625 a year in taxes if there were no revenue-neutral policy in place. By lowering the tax rate to 40 cents per $100 valuation, a government would receive $500 a year in taxes, the same amount the homeowner paid in previous years.
A revenue-neutral policy makes sense, especially to taxpayers. Local governments should keep that in mind as they work on their upcoming budgets.