Garner leaders are worried that tax reform in the General Assembly could rob the town of 4 percent of its annual revenue. That’s a chunk of change, but our thinking is that Garner is fretting too much too soon.
First of all, state lawmakers have said that whatever tax revenue they take with one hand they will replace with the other. Most likely that means replacing franchise taxes and business-licensing fees with a sales tax that is higher and, or covers services, not just goods.
At a meeting with Wake County’s legislative delegation, Garner leaders wisely voiced their concern about the potential loss of revenue, but until the General Assembly acts, it’s too soon for Garner to push the panic button.
Besides, if the General Assembly doesn’t make Garner whole, the town can raise whatever revenue it needs through the property tax. Granted, a tax increase would not be popular, but it would be legal and prudent if needed to pay the town’s bills.
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(It’s even possible that Garner leaders, with an extra-hard look at town spending, could find savings of 4 percent. That would be a plus given the debt Garner is about to take on after voters said yes to borrowing $35.7 million.)
Franchise taxes and business-licensing fees are popular because the perception is that businesses pay them. But the fact of the matter is that consumers pay the taxes that government supposedly levies on taxes.
Progress Energy, for example, might pay a franchise tax to Garner, and Best Buy in White Oak Crossing might pay a licensing fee. But rest assured that Progress Energy factors that tax into the rate it charges customers, including Garner customers. Likewise, Best Buy recoups its licensing fee in every DVD it sells.
Opponents of the tax reforms favored by some Republicans complain that a higher or broader sales tax, for example, will fall hardest on consumers, especially the poor. They are no doubt right.
But it’s just as true that consumers eventually pay all taxes, even franchise taxes and licensing fees billed to businesses. The challenge for state lawmakers and Garner leaders is to levy those taxes so that those who can afford less pay less.