Capping local business tax could hurt businesses

April 10, 2014 

Here they go again. Republican legislators pride themselves on championing the interests of business, but sometimes they don’t know when to quit.

Deregulation that means lax or less enforcement of environmental rules, for example, eventually is going to cost everyone more when bad air and fouled waterways have to be cleaned up. Lost revenue from tax cuts is going to mean state programs that benefit all residents will have to be curtailed.

Consider the latest proposal from GOP lawmakers: capping at $100 the privilege license taxes that some cities and towns apply to businesses. The taxes are fair enough, in that businesses benefit considerably from being in populated communities, and the municipalities use the money to provide services from which businesses benefit. In turn, average taxpayers perhaps get a little break because they don’t have to cover the cost that would fall to the cities if they didn’t have the privilege license tax revenue.

The AP reports that municipalities collected $62 million in privilege license taxes during the 2011-12 fiscal year. It’s estimated that municipalities could lose up to $25 million in lost revenue in the 2015-16 fiscal year if the cap becomes law.

For Raleigh, that would mean a loss of $6 million; for Charlotte, possibly $14 million. If that happened, said Raleigh City Manager Ruffin Hall, other fees would have to be raised or services cut. Some small cities and towns might have to raise property taxes to offset the lost revenue.

This appears to be an instance where some lawmakers want to ease the tax burden on businesses, but the effect may actually hurt the quality of municipal services that help businesses thrive.

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