Setting the Record Straight on Privilege Taxes

October 30th, 2014 by

October 29, 2014

Leaders of Apex, Holly Springs and Fuquay Varina

Re:       Privilege Taxes/Fiscal Impact

You may have read in Monday’s News and Observer the article entitled “Privilege Tax Repeal Could Cause Property-Tax Hike in Raleigh”.  The link is attached here.

The General Assembly took several measures in 2013/2014 that affect revenues for cities and towns.  For the towns in District 37, Apex, Holly Springs and Fuquay Varina, the results are a positive increase in revenue for 2015-2016 as shown on the attached table by the Fiscal Research Division.  The increase in revenue from tax reform (HB 998) which applied the local sales tax to several additional items and the change in taxation on Amazon more than offset the repeal of the privilege license tax.  For Apex (which has no privilege license tax) the net increase is $113,395.  For Holly Springs the net increase is $33,659 and for Fuquay Varina the net increase is $11,241.

The bulk of the revenue lost from the repeal of the privilege license tax is from Charlotte ($17 million) and Raleigh ($7 million) and similar towns.  Charlotte in particular was a major abuser of the system, attempting to tax businesses located in most of the other counties of North Carolina, other states in the nation, and even some in foreign nations.

The article tries to imply that “business taxes” were repealed by the General Assembly, therefore putting the burden on people who own homes.  This is nonsense.  Business owners still pay property tax, corporate income tax, franchise tax, the employer’s portion of Social Security on their employees, workers’ compensation, unemployment insurance and a host of miscellaneous fees. And their owners pay personal income tax on the dividends. If they are an LLC or sole proprietorship, they pay personal income tax on all the net income.

The “privilege tax” was repealed because it is an absurd and irrational way to collect money.  Good riddance.