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Speaking Out: Privilege license tax 

NCLM President and Goldsboro Mayor Al King offered this view on the privilege license tax, which was published in Charlotte Observer on June 12, 2014.

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Late last month, the N.C. General Assembly, as part of a follow-up to 2013 tax reform legislation, placed new limits on cities’ collection of local business privilege license taxes and set up a repeal of the tax effective July 1, 2015. In doing so, both legislative leaders and Gov. Pat McCrory, who signed the bill into law, pledged to work with the N.C. League of Municipalities and its 542 member cities, towns and villages to find a solution to the revenue loss – a looming $62 million fiscal cliff for municipalities big and small.

Months earlier, the League made reform of the privilege license tax a top priority and has been working with legislators to find ways to address concerns about how the tax is applied. As the debate moves forward, North Carolinians need to understand the full implications of that repeal and what the loss of revenue will mean to those living inside and outside corporate town limits.

In the 21st century, our cities have become the state’s economic engines. When they and their tax bases thrive, the counties that call them home thrive and the state as a whole thrives. Eliminating the privilege license tax, without some form of replacement revenue, puts more pressure on property tax rates. Some say that is fair, that the property tax is applied more broadly. Essentially, the argument is that the property tax can take the pressure.

To see the fallacy of the argument, look at some of the state’s distressed, rural counties. There, local officials face a Catch-22 as they weigh high property taxes to pay for needed services against the detrimental effects those taxes have on economic development. Those communities exist on a treacherous financial plane, where the options to pay for services are limited by economic reality. Any policy prescriptions which limit options for all cities in a similar fashion are no way to grow the economy. Limited financial options for cities also mean fewer services – fewer police on the streets, fewer firefighters, fewer of the amenities that our residents expect for a higher quality of life.

North Carolina’s modest property taxes, relative to other states, are as critical as any part of the tax equation when it comes to creating jobs, encouraging growth of existing industry and recruiting new industry. Ratcheting up pressure on local government to raise property taxes is not effective tax reform. A vibrant economy requires vibrant cities, and those cities need certainty in their budgeting and options when it comes to paying for the services that residents need and desire.

Read more in the Charlotte Observer.