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

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CCM Economics, LLC Orange County Tax Equity Page 30 Most federal government spending on goods and services, including national defense, can be classified as a pure public good.19 As an illustration, in 2015, the federal government spent $58 billion on public order and safety, $18 billion on space exploration, $20.3 billion on air quality, etc.20 Since these goods are public in nature, it is assumed that the benefits are equally distributed among the population. Therefore, each person receives $3,030 in benefits from federal government spending. The state of North Carolina spent approximately $21.7 billion in 2015. These monies also fund a wide variety of public goods such as education, public safety, highways, state parks, and the like. From a per capita viewpoint, this totals to $2,144 in benefits. These are illustrated in Table 5 which shows benefits from the different municipal and county government programs. To determine the benefits derived from municipal and county government spending, an examination of county and municipal budgets was done—similar to the analysis to ascertain the different sources of tax revenues. Not every municipality broke out similar expenditures in the same category. For example, Chapel Hill classifies its spending on parks under the category ‘Lesiure” while Hillsborough’s can be found under ‘General’ government spending. Similar issues occur for other spending such as ‘public works’ where Mebane classifies it under its own category but other towns divide up ‘public works’ into different categories. A further instance is Chapel Hill spending money out of its specialized separate funds for things that other cities would classify as general government spending. For example, Chapel Hill spent $99,508 on playground Replacement under their Capital Improvement Fund.21 To simplify the analysis of 19 See Appendix C for clarity. 20 This is the most recent year that detailed data on federal government expenditures is available from the Bureau of Economic Analysis. 21 To make comparisons between municipalities simpler, Capital Improvement Expenditures such as the $99,508 are counted in the same category as the $6.196 million spent on parks during the year. 67