State law aimed at helping businesses could cost cities millions

GUILFORD COUNTY, N.C. — The Greensboro City Council is working on this year’s budget, but a decision in Raleigh has some city officials already worried about the 2015-2016 budget.

Gov. Pat McCrory signed a bill into law last week that eliminates privilege license taxes, which are taxes businesses pay to do business in a city.

The idea is to level the playing field for businesses, since different municipalities have been charging very different fees across the state.

Businesses pay up to $2,500 a year for the license in Greensboro.

William Clayton, part owner of Civic Threads in Downtown Greensboro, remembers the stresses of starting a new business all too well.

“Yes, definitely a ton of costs associated with it. Everything from the licensing, to making sure you have the proper insurance, to obviously the inventory that you carry,” said Clayton.

While repealing the tax helps business owners, losing that revenue will be a serious blow for some cities’ budgets when the law goes into effect in 2015.

“To have them do away with it altogether was a bit of a surprise,” said Greensboro Mayor Nancy Vaughan. “Now, we know that [our budget] is not going to be balanced and there’s going to be a deficit of $3.2 million.”

Whether the deficit is $3 million or $800,000, like the City of High Point faces, the money will have to come from somewhere.

“We would have to look at cutting that amount of services or increasing the tax rate to make up for that,” City of High Point Budget & Evaluation Officer Eric Olmedo said.

Olmedo says privilege license taxes are capped at $400 for non-retail businesses, and $4,000 for retail businesses in High Point. He says privilege license taxes account for less than one percent of their general fund revenue.

Like city leaders, small businesses are also dealing with tight budgets to keep the doors open.

“I’m just glad North Carolina is looking forward and trying to make it so small businesses can prosper and can succeed. That new things can start up without a whole bunch of headache for the little guys,” said Clayton.

Mayor Nancy Vaughan says state legislators have discussed finding ways to help cities balance their budgets. However, out of the $62 million potentially lost in privilege license taxes across the state, legislators have only found $14 million in new revenues.

7 comments

  • Joseph

    Hmmm.. This makes me wonder who Nancy Vaughn voted for in the state legislature. You asked for it.. you got it! LOL

  • Khai

    I guess cities will simply have to cut wasteful spending…I think its a great idea! Proud to be a North Carolinian when I read stories like this.

  • Ty Raid @WM2793

    They are already worried about next years budget? Seriously,, that must be a relativively s
    mall portion of the budgeet, they must be afraid of their slush fund being cut

  • WB Ryan

    Let’s see. Lower the cost of starting a small business in NC. More small business owners succeed and prosper. More they succeed, better chance they hire others. And all of the above spend more, thus generating tax revenue. So what’s the problem with this? How is it bad for the city?

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