WILMINGTON — A handful of local and statewide nonprofits are speaking out against a tax they said has disproportionately affected marginalized communities for three decades. When the city council was presented with an item this week to allocate funds for a law enforcement museum, concerns were raised on where the money was coming from.
Daquan Peters, Second Chance Alliance coordinator for New Hanover County, called the N.C. Drug Tax — the pot of money the Wilmington Police Department is asking to use — “draconian” and “a relic from the War on Drugs.”
City council tabled the item that would allocate $40,000 in drug tax revenues to construct the museum. WPD made the request; Chief Donny Williams told council at Monday’s agenda briefing he wanted a place to display artifacts and tell the story of WPD’s history.
The item was continued to Sept. 6. City spokesperson Jennifer Dandron explained since Chief Williams could not attend Tuesday’s council meeting, they postponed hearing the item to allow him a chance to be present and answer questions.
Peters is urging city council to vote “no” on the proposed ordinance. N.C Justice Center, New Hanover County Second Chance Alliance, ASCIA, Inc., Forward Justice, North Carolina Innovators for Success, and RottenKitty Films — comprising hundreds of residents, attorneys and advocates — sent a letter to council Tuesday making the request. The groups said the money could better be used to help the community.
Peters said the Wilmington Police Department’s proposal “does not directly benefit the community or include community input” and funds collected from the tax should be reinvested into areas most impacted.
Some examples he gave include funding entrepreneurial programs for formerly incarcerated individuals, substance treatment programs, housing subsidies and scholarships for children with parents serving jail time.
“In essence, what the state of North Carolina is doing is funding the legal system off the backs of poor people, in particular Black and brown folks,” Peters said at a media conference Tuesday outside city hall before council met.
According to the N.C. Justice Center, a nonprofit comprising attorneys, journalists, policy analysts and directors advocating for issues facing low-income North Carolinians, “the drug tax perversely incentivizes over-policing of vulnerable communities.”
The Brookings Institute in Washington D.C., shows Black people are three to four times more likely to be arrested for drug crimes, even though they are no more likely than white individuals to use or sell drugs. Black individuals are also roughly nine times more likely to be admitted into state prison for a drug offense.
At least 33 states have repealed their drug tax laws, many as far back as 1995. North Carolina’s Drug Tax law has been in place for 30 years. It is required on “unauthorized substances,” including illegal drugs and liquor.
A person who purchases these items has 48 hours to also buy a “stamp” that is supposed to be permanently affixed to the drug, showing proof of tax payment. Rarely do people actually purchase these stamps, even though their identities are required to remain anonymous. Employees with the N.C. Department of Revenue — where stamps are purchased and the money is collected — can be charged with a misdemeanor if they release confidential information to law enforcement.
Most individuals end up covering the cost of the tax after being convicted of a criminal drug-related crime. Then they’re hit with penalties and back-tax fines for not paying.
According to testimony from the NC Justice Center, Shannon — a Wilmington resident and mother whose last name was not released — served two years in jail for a drug conviction. After completing probation, the state informed her she owed $100,000 in drug taxes and it continues to garnish her paychecks to pay it off.
“I don’t see myself being able to pay this in this lifetime, the next lifetime, or any other lifetime,” she said in a YouTube video. “$100,000 for one mistake that I feel like I did my time for.”
Since the law went into effect in North Carolina in 1989, the state has collected more than $175 million, averaging $6 million to $11 million annually in drug tax revenues. NC Policy Watch stated only 0.02% or roughly $35,000 of that has come from revenue of stamp purchases.
As of 2010, only 109 stamps were purchased in North Carolina, the majority by stamp collectors, according to the NC Justice Center. NCDOR confirmed only 17 have been purchased since 2019.
“Due to the anonymous process associated with the purchase of stamps, we are unable to determine the number from Wilmington and/or New Hanover County,” a spokesperson from NCDOR said.
Of the collected money, 75% goes back to law enforcement agencies and 25% goes into the state’s general fund.
Over the last three years, NCDOR reported the drug taxes returned $299,458 to WPD and $364,018 to the New Hanover County Sheriff’s Office.
The WPD noted in a statement to media it has used the drug tax money throughout the years to “purchase equipment and training that has aided” in protecting and serving the community, as well as helped educate others on “life-saving topics.”
The department explained its museum would highlight the agency’s history and “bridge the gap between the police department and the community.” The museum would welcome visitors “in a manner that is not service driven,” a release stated, but to connect and learn about the officers and the department through exhibits on policing and interactive educational opportunities.
“The museum will serve as a permanent community engagement tool that can serve our community and will connect citizens from all backgrounds with our agency,” a WPD statement read.
“This is not an attack on the WPD,” Peters iterated numerous times throughout the press conference. He also noted he understands the need for the museum. Yet, he made it clear the funds the department wants to utilize should directly go toward programs for residents who have been affected by drug-related charges.
Peters explained a person convicted of a drug charge, who serves prison time, also has to pay court costs, fines and fees, as well as probation fines and fees when he or she is released. In addition, the back taxes and interest assessed for the drug tax are charged at 40%. That amount averages nearly $9,000, up to $5 million, according to the NC Justice Center, and impacts roughly 4,000 individuals annually.
Not only can the state garnish a person’s wages to get the money, it can seize assets — homes and vehicles — and dip into personal bank accounts.
“You’re already dealing with poor people,” Peters said. “Why would you continue to keep them behind the eight ball to keep them behind in life?”
The Carolina Journal reported in 2019 the original tax rates were so high — $200,000 for a kilogram of cocaine — a federal judge ruled that imposing those charges on top of criminal charges was unconstitutional. The judge said it was the equivalent of trying a person for a drug crime twice, which is illegal under the Fifth Amendment double jeopardy clause.
Amounts have since been lowered to $200 per gram of cocaine, for example — a 1 million percent difference.
Marijuana is taxed at $3.50 per gram and low street-value drugs are $50 for each gram over 7 grams, and illicit liquor is between $12.80 and $31.70 per gallon.
In 2019, UNC School of Law professor Jonathan Holbrook — now with the North Carolina Conference of District of Attorneys — attempted to purchase stamps to see how the process works. Although an individual is supposed to remain anonymous, he said when he went to the NCDOR officer, he had to fill out a form with his name, social security number, address, phone number and reason for his visit.
He also found the service centers where people are sent to obtain these stamps, didn’t actually carry them. In his experience, the only way to purchase a tax stamp was to fill out a form, mail it in and receive a return letter in the mail — something he said was impossible to have happen in the 48-hour window that is legally mandated.
The Wilmington NCDOR office for purchasing drug tax stamps is located at 3340 Jaeckle Dr., Suite 202 and open to walk-ins Friday 9 a.m. to 4 p.m. Appointments can be requested Monday through Friday during the same window of time.
Port City Daily called the Wilmington NCDOR office to ask how often it receives requests for stamps; a call was not returned by press.
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