The Local Tax System

At times, government gets a program so thoroughly twisted and convoluted it makes sense to just discard it and start over rather than trying to tweak it to straighten out the mess.

Our state and local tax code is a good example.

Over the last century, the legislature has created a tax code only a lobbyist could love. The recent hubbub over Conover’s new tax on Wal-Mart and other retailers is an example because how those taxes were raised exposes a big flaw in our tax code.

For politicians, raising taxes is a risky business. Naturally, they prefer to raise taxes – like this one – where they can say the tax will be paid by large merchants (like Wal-Mart) instead of you and me. In fact, Wal-Mart isn’t going to pay this tax. What really happens is Wal-Mart’s computer adds the new tax to the cost of business and increases prices and passes the tax straight along to shoppers. You and I still pay the tax, even though it doesn’t show up on our receipt like the more obvious sales tax.

That’s how a ‘hidden tax’ works. You pay it but don’t see it. It’s one of the big flaws in our tax code and it’s there for one reason: Politics.

Instead of being ‘hidden’ taxes should be obvious. You should see it. You should know it. That’s the only way you and I can hold the politicians accountable when they raise taxes.

Unfortunately, the politicians have crammed our tax code full of hidden taxes that are not seen but are always felt – and paid. And these taxes sap jobs out of our economy and cash out of family budgets.

In North Carolina, hidden taxes happen all the time. Look closely at your phone bill or your internet bill. In other cases – like the Wal-Mart tax – they are so cleverly hidden you can’t see them at all.

Reviewing a typical city budget reveals a related problem. Approximately one third of the local government’s revenues actually come from state taxes that are collected by Raleigh and partially returned to local governments.

This is good deal for local elected officials-they avoid the blame for raising taxes. But it also means they give up control of their income. They become dependent on Raleigh – just as states have become dependent on Washington.

It’s also a problem for the rest of us. If people in Catawba County pay local taxes to local government they can hold local elected officials accountable. But when local tax money flows to Raleigh and then back to Hickory or Conover, it’s impossible to hold some State Senator across the state in Currituck County accountable.

Here’s a solution: Let’s eliminate hidden taxes. Just throw them out. End them. Then let’s eliminate tax transfers back and forth with Raleigh. Only then will taxpayers be able to know what our government really costs and be able to hold the people they elect accountable.

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