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North Carolina, a leader in manipulating your diet through taxation

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North Carolina, a leader in … manipulating your diet through taxation

Out of the 50 largest cities in the United States, 15 of them impose taxes on prepared meals. Of those 15, two are from North Carolina — Charlotte and Raleigh. Including the general state and local sales taxes as well, restaurant-goers face a point-of-purchase burden of 9 percent in Charlotte and 7.75 percent in Raleigh.

Perhaps you can stomach those taxes, since they purportedly burden wealthy people the most. That goal has more than dubious ethical weight, but the Tax Foundation has noted failure in that realm:

[T]he wide diversity of takeout dining options suggests that such a tax is poorly targeted to achieve that goal. One could say that it is a tax on individuals with less flexible schedules or who do not like to cook — rich or poor.

These "luxury taxes" also generate ongoing and counterproductive definitional problems over what constitutes "prepared food," so one would better describe them as taxes on behavior. Albeit in a subtle fashion, the disparate tax burdens coercively manipulate individual actions.

North Carolina legislators are no strangers, however, to the use of taxation as a "policy tool," particularly in the case of diet. To heighten the disparity with prepared foods, for example, they exempt almost all groceries from the state’s general sales tax of 4.75 percent.

What do they not exempt? You guessed it: candy and soda. North Carolina is one of 17 states that do not include candy in the grocery definition and 22 states that do not include soda (p. 6).

As violations of liberty alone, these policies merit opposition, but even their outcomes are failures. Rather than bring superior behaviors (p. 10), they have simply been cash cows — much like taxes on cigarettes and alcohol.

A tax on "unauthorized substances"? Mum’s the word

Sometimes fact is stranger than fiction, and this past week, one of my colleagues shared that North Carolina places a tax on banned substances, including marijuana and cocaine. The tax rates are oddly intricate and suggest the authors know a thing or two about what they’re taxing; they merely want a piece of the action (p. 2, Chapter 105-113.107).

That’s right, while possessing these substances illegally, one is supposed to tell government officials about it within 48 hours in order to pay the tax. North Carolina Department of Revenue officials would then provide them with a stamp to affix to the items as evidence of tax compliance, although that does not make the possession legal.

That people, while rebelling against the law, are paying the tax is perhaps even harder to believe. In 2010 the unauthorized substance tax generated $9 million, and to bring in this money, Department of Revenue officials state on their web site that any such information associated with the tax is confidential and will not be disclosed.

A message to those advocating drug legalization so it can be taxed: Legislators here in North Carolina are already having their cake and eating it too.


  • On Wednesday, March 7, I will be presenting testimony before the House Select Committee on Agricultural Regulations at a hearing on raw milk legalization. The meeting will begin at 1:30 p.m. at 1228/1327 LB.
  • There will be a Constitutional Candidate Forum, hosted by Founders’ Truth and Constitutionalist Gathering Place, taking place on March 10 from 1 p.m. to 4:30 p.m. at the Pitt County Courthouse in Greenville. Go here for more details.

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Fergus Hodgson (@FergHodgson) is Director of Fiscal Policy Studies at the John Locke Foundation, a Policy Advisor with The Future of Freedom Foundation, and a member of the American Legislative Exchange Council’s Tax and Fiscal Policy Task Force. He… ...

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