TAX NEWS - June 2010

North Carolina Tax: Morrisville vehicle tax likely to rise

Morrisville, which considered tripling vehicle taxes, may double them instead.

MORRISVILLE - Residents who keep a car in the town are likely to see an increase in the annual tax levied on motor vehicles during the upcoming fiscal year.

But the impact on residents' wallets might be less jarring than previously expected.

During its final public address on a proposed budget plan for 2011, the Morrisville Town Council appeared poised Tuesday to double Morrisville's vehicle tax.

Officials have said that an increase in tax revenues would help offset the cost of fixing roads during a budget crunch.

The town had previously considered a proposal to triple its vehicle tax. Morrisville has about $1.8 million in unfunded road projects, and officials are wondering how residents could chip in.

"I don't personally feel that it should be an unusual hardship for people," said Councilwoman Margaret Broadwell.

For the past three years, auto taxes have accounted for about 6.6 percent of the revenue the town collects from various licenses, registrations and franchise taxes.

Next year, officials want vehicle owners to shoulder a bigger chunk of the $1.3 million in expected revenue in that category.

For years, residents have paid a local tax of $5 per vehicle kept in the town.

Now officials want to bump the per-vehicle fee to $10.

The move, if approved on June 22, would add $68,500 in anticipated revenue - a drop in the bucket in a town with a $21.7 million budget.

Which in part is why the original proposal, which would have generated $137,000 in motor vehicle tax revenues, wasn't received well by everybody.

On one hand, the growing town has been looking for ways to pay for improvements at a time when revenue is essentially flat. On the other, officials had to square concerns about placing the burden on taxpayers against possible cuts in other departments.

At least some of those fears appeared to have melted away last week in an unusual compromise.

In addition to the $5 tax increase, council members also suggested that they would back a one-time withdrawal from Morrisville's savings to make up for the difference in the two tax proposals.

"I would support it this time as long as it's a one-time thing," Mayor Jackie Holcombe said. "As a general rule, though, I just don't think it's a good idea."

At least one council member continues to oppose any permanent increase to the town's vehicle tax amid tough economic times.

Councilwoman Liz Johnson said she would support a one-time withdrawal from Morrisville's fund balance to pay for needed repairs to the town's roads.

"As I said when we first started talking about the budget, I'm not in favor of raising it at all," Johnson said. "I was on the council when we requested this item as part of our legislative agenda [in 2007].

"We asked to be granted authority to raise [the vehicle tax]," she added. "I was OK with asking for that authority so we could raise it at the right time.

"I just don't feel like this is the right time to be doing it."