If you want to see the difficulty in trying to
implement tax reform and a decentralization of power, look at North
Carolina. I can’t even imagine trying
this at the national level. Every
special interest group is fighting tooth and nail to keep the status quo. If the states’ republicans aren’t successful
at beating back the teat squawkers, at least the exercise has been insightful.
What surprised me is how powerful nonprofit
organizations are in this state.
Hospitals, which have higher profit margins than Exxon, are complaining
about the loss of revenue because the General Assembly refused to expand
Medicaid. They are also bitching about
proposals that would eliminate exemptions from collecting sales taxes and subsequent
refunds. Yet, Carolina’s HealthCare
System’s CEO’s 2012 compensation was $4.7 million, which included bonuses over
$2 million. And this is a nonprofit?
Another band of teat squawkers that operate under
the radar are cities and townships. To
get a good idea of how involved the State is in funding everyday operations,
here is an excerpt from the Charlotte Observer:
In the Senate plan, the biggest hit
for the city in the tax bill would be the repeal of the privilege license tax
that cities impose on certain businesses. The loss of this levy would cost
between $17 million and $18 million a year when fully implemented.
The business privilege tax is levied
on all businesses, trades and professions operating inside Mecklenburg County.
The minimum tax is $50. The maximum is $10,000.
The city could also lose $15 million
per year if it loses refunds on sales taxes that it pays to the state, plus an
additional $10 million from the elimination of the local sales tax on food. The
lost revenue would be partially offset by an additional $11 million in revenues
from additional taxes that nonprofits such as hospitals would pay.
Berger spokeswoman Amy Auth said the
Senate’s tax reform plan incorporated feedback from people across the state,
including constituents, businesspeople, other legislators and the governor. In
particular, a vast majority said the state should not tax food, she said.
Local governments have other options
for raising money for local services and infrastructure, including impact fees,
water fees and other local taxes, Auth said. Governments could make up for lost
sales tax by reinstating the food tax, or they could reduce spending, she said.
As for privilege taxes, Auth called
them a disincentive for business to move to and create jobs in North Carolina
and noted municipalities will have five years to prepare for the change.
According to the League of
Municipalities analysis, Charlotte would lose the largest amount of revenue in
the state, but other communities would face steeper tax increases. The
Edgecombe County town of Leggett, for example, would need to raise property tax
bills by 849 percent to make up for $83,584 in lost revenue.
Among Charlotte-area communities,
Monroe would take a $2.2 million hit, Gastonia would lose about $2 million and
Mooresville would come up $1.1 million short.
Cities like Charlotte have been double
dipping. Besides imposing their own
taxes, they use the state to confiscate wealth from their citizens through taxing
services and items like food. They then get
the rebates, all the while scrubbing their hands of the dirty political
process. In the meantime, we have sprawling
unaccountable bureaucracies that perform duplicate, and without a doubt,
substandard service.
A famous Democrat once said all
politics is local. That’s the way taxation
should be as well. All forms of revenue
should be transparent and the politicians of that community held
accountable. But as we’ve seen, it’s
better to operate in the shadows.
