7-a - Report on the Orange County Tax Equity Study

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CCM Economics, LLC Orange County Tax Equity Page 25 To ensure that the tax burden from the zip code data of Orange County was properly assigned and controlled for, GIS analysis was used to assign proportions of each zip code to Orange County and the respective municipalities. However, GIS land area analysis was not sufficient in and of itself. One also has to analyze where people live. Consider again the aforementioned example of zip code 27278. The land area of the town of Hillsborough takes up 58.5% of the land area of the zip code; however, only 26% of the population of the zip code that lives in Orange County lives within the town of Hillsborough. Therefore, detailed analysis of the land area and population distribution was employed for each of the zip codes, municipalities, and the county to determine the correct proportion of the IRS zip code level income statistics data to assign to the respective 5 geographic subunits. Retail sales taxes are the 3rd largest source of revenue for Orange County government. Some states, such as Missouri, make detailed records about retail sales available to the public and upon request. For example, in the 1st quarter of 2016, there were $3.2 million of retail sales from bakeries within the city limits of Kansas City. From detailed records such as these one can determine how much each household in and around Kansas City spent and how much cities collected in sales taxes. The state of North Carolina does not release such detailed sales tax records. Therefore, to determine sales tax paid on a per capita basis, one has to take the data that is available on retail sales in the county and build models of a typical household’s spending. These spending models are based upon income, household size and structure, and other important characteristics. For example, a household that earns $35,000 per year will have different spending habits then a household that earns $100,000 per year. This is true even if these two households have identical family and age structure. Similarly, a 2-person household 62