Local governments in North Carolina are angry that state lawmakers took away their power to force businesses to purchase annual privilege licenses. The most common refrain: State lawmakers should not meddle in local government affairs.
But that refrain, while it might play well in town halls, ignores the reality of local government financing in North Carolina. Which is to say that towns and counties in the Tar Heel State enjoy no taxing authority not granted by the state.
In other words, the state gave towns and counties the power to levy the privilege license. That means the state, no matter its motive, has the right to take that taxing authority away.
From where we sit, the privilege license is an arbitrary tax on business. One town website we visited said the privilege license allows officials to know who is conducting business in the town. We would think the town could discern that when the business came to town hall to get the water turned on.
By the way, we know of no residents who pay a privilege license so towns can know they’re there, though if police reports are any indication, residents cause more trouble than businesses.
It’s true too that many towns in North Carolina derive much of their privilege license revenue from an illegal source – Internet sweepstakes parlor outlawed by the General Assembly in a ban upheld by the N.C. Supreme Court. In Clayton alone this past year, town revenue from sweepstakes parlors totaled $124,000, up 287 percent in four years.
But no matter the source of the revenue, state lawmakers determined that towns and counties were relying too heavily on the privilege license, so much so that it was creating a negative business climate in North Carolina. We don’t know if that was the case, though $62 million statewide is not chump change.
But we do know that the state can take away any taxing authority it gives towns and counties. The only meddling lawmakers are doing is in their own affairs.