STAMP OUT THE BUDGET SHORTFALL

RALEIGH -- Considering that North Carolina faces a $1.5 billion budget
shortfall, it's my civic duty to help narrow the gap. One way is to
generate more revenue while maintaining current spending levels. And
while perusing the state Department of Revenue's Web site
(www.dor.state.nc.us), I found a little-known revenue-generating gem
that simply begs to be exploited.

Since 1990, North Carolina has utilized an excise tax for
"unauthorized substances." According to the Web site, a taxable
unauthorized substance is "any controlled substance (marijuana,
cocaine, etc.), illicit spirituous liquor ("moonshine"), mash and
illicit mixed beverages."

In some twisted way, the state, by taxing outlawed activity, seems to
be countenancing disobedience of the law. How is this possible? I did
some research, sifting through case law and general statutes, as well
as speaking by phone with people at the Revenue Department, and this
is what I came up with:

The Controlled Substance Excise Tax (GS, Ch.105, Art. 2D) walks a thin
line between unconstitutionality and genius. It took some time and
many modifications for the legislation to become brilliant (before, it
was simply unconstitutional), but as with spirituous liquor,
perfection takes time.

To avoid unconstitutionality, the law has to circumvent double
jeopardy, a feature of the Fifth Amendment. Double jeopardy means that
if you were found innocent of one crime, you cannot be charged with
the same crime again. If the punishment for not paying your
unauthorized substance tax were so punitive as to be considered a
criminal offense, then, if you were found innocent of possessing an
unauthorized substance (a criminal offense), you could not be
prosecuted for evading the tax on your unauthorized substance, and
vice versa.

As it stands today, the penalty for not paying the unauthorized
substance tax could equal 150 percent of the tax due.

Suppose, say, a drug dealer determines to avoid the penalty and
perform his patriotic duty to pay taxes on the proceeds of his civil
disobedience.

He's in luck; the law forbids the Revenue Department from reporting
him to criminal justice authorities. All he needs to do is go to the
office or apply via mail or fax, attention Denise Lanier. Payments are
preferred by money order. After paying, the unauthorized substance's
owner will receive a stamp via certified mail that authorizes his
possession of an illegal substance.

But watch out. The burden is on the conscientious drug dealer to set
up a timetable for compliance. The state generously gives him 48 hours
in which to report his illegal substance for taxation. Unfortunately,
it takes a full two weeks to mail him the stamps. Even if our
patriotic payer had a PDA to organize his imports and exports,
compliance would be nearly infeasible.

How many avail themselves of this service? According to revenue
officials, only 77 people have fulfilled their civil unauthorized
substance tax obligation since 1990 -- and most of them, a CNN story
reported last April, were likely philatelists adding the unique stamps
to their collections.

Of course, the fewer people who comply, the better off the state is.
Over the course of 15 years, the state has taken in $78.3 million in
fines through the law.

So how can we tweak this law to help the budget?

One way would be to encourage more drug dealers to come to North
Carolina, make compliance with the law more impossible by hiding the
necessary forms within the bowels of Revenue Department, halve the 48
hours dealers are allowed to apply for and receive their stamps, and
then ramp up illegal drug enforcement. Revenue collected in this
manner should not be earmarked, as is the current case; it should all
be thrown into the money pit -- er, General Fund.

Another option is to raise the tax by 100-200 percent, then advertise
the change and the tax in general, along with the philatelists' idea
that the stamps themselves have value. Emboss them. Suggest them as
suitable Christmas or birthday gifts.

In either case, the state should be rolling up the dough.

(Paul Messino is an editorial intern with the Center for Local
Innovation, a subsidiary group of the John Locke Foundation.)