Taking the 'local' out of local control

Editorial by Charlotte Observer, March 22, 2014.

First, there was a law telling N.C. cities and towns they no longer had control over billboards in their jurisdictions. Then there were the laws limiting local authority over inspecting rental properties and environmental rules, not to mention attempts to take away control over housing design standards and smoking bans and, of course, Charlotte’s airport.

Now, Republicans in Raleigh have crafted a plan telling cities how they administer local business taxes – and how much they can collect.

This is the party of More Local Control?

This month, the legislature’s Revenue Laws Study Committee drafted a proposal capping how much cities can charge for business privilege licenses. The committee wants to cap that tax at $100 per business. It’s a change that would cost Charlotte $8.5 million per year, Budget and Evaluation Department director Randy Harrington tells the editorial board. A city staffer will present concerns about the changes to City Council on Monday.

What’s behind the proposed changes? Some Republicans don’t think businesses should be charged more to operate in one place than in another. Plus, Republican Sen. Bob Rucho of Mecklenburg told the N.C. League of Municipalities this month that some cities have “abused” their authority to collect the fees.

It’s true that N.C. cities have differing approaches to collecting the tax. In Charlotte, businesses are charged 60 cents per $1,000 of gross revenue, with an annual cap of $10,000. In Raleigh, businesses pay a tiered flat fee based on revenue up to $100,000, then 60 cents per $1,000 after that with a cap of $20,000. In Durham, there is no cap.

Harrington says that uniformity in privilege taxes could benefit businesses that operate in several N.C. cities, and he’s right. But even as is, the privilege tax is an easy financial calculation for most anyone in charge of a company’s books.

The obvious target here is revenue. Republican lawmakers want to save some for businesses, and they don’t mind taking it away from local governments. Rucho claims that cities will make up for the hit with increased revenues from sales tax reform. But from cities’ perspectives, that’s taking away something real and replacing it with something speculative. And $8.5 million is a lot of real, even for a city as large as Charlotte.

The larger issue, however, is meddling. Proceeds from the business privilege tax goes exclusively to cities, and the tax is one of only two that Charlotte has the authority to impose. (The other is property taxes, which has no dollar cap.) It’s a local tax, set by local officials who answer to local voters.

That, unfortunately, hasn’t meant a lot recently to Republicans in Raleigh, who say they are in favor of local government control, but apparently only as long as they agree with it.