Politics and sleight of hand, all too often, go hand-in-hand.
A hidden tax – like the ‘Privilege Tax’ – is an example.
Here’s how it works: A city makes a retailer (like Wal-Mart) pay a tax of, say, $25,000 for the ‘privilege’ of doing business in the city. The retailer then plugs the new cost into its computer and adds a small amount to each purchase at the store so it can pay the tax. So when local citizens pay their bill at the checkout line they see the sales tax added to the bottom of the receipt but the Privilege Tax amount is hidden inside the cost of each purchase. The consumer has no idea he or she just paid a tax to the city.
That’s bad for consumers. But it’s quite lucrative for the city. One local municipality receives $1.1 million every year from hidden Privilege Taxes.
That’s why a plan in the NC General Assembly to reform the Privilege Tax is generating a flurry of protests from NC municipalities, including a not-so-subtle threat: The cities say if the legislators take away their hidden tax, then they will have to increase property taxes. To hear them describe it, every city government is so lean and mean and there is no spending anywhere to be cut to avoid raising property taxes.
Of course, what they’re really saying is, “We like collecting a million dollars in taxes people don’t see and if you repeal the hidden taxes, then we’ll have to show people the total taxes (they pay on their property tax bills) and we don’t think that’s a good idea.”
One more fact: there may be someone less interested in raising local property taxes than me, but it’s not likely. So, I asked a few questions and got a surprise. It turns out the very same city that imposes a hidden Privilege Tax of $1.1 million annually also has $7.8 million in uncollected property tax bills – going back years. So here’s how the system works: One group of people fail to pay $7.8 million in property taxes, then, to make-up for the shortfall, the city puts a hidden tax on everyone else.
How’s that for broken politics?