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The History of the North Carolina Drug Tax

The unauthorized substance tax, more commonly known as “The Drug Tax” is one of the many longstanding staples of the War on Drugs that continues to primarily punish low-income Black and Brown community members in NC. 

The Drug Tax extracts hundreds of thousands of dollars from low-income communities and communities of color each year, with the average tax assessed for an individual being $8,872. They collect this money from people’s bank accounts, garnishing their wages, and seizing and selling their personal property. Most of the money collected then gets funneled back to the law enforcement agencies that over police black and brown communities. 

Nearly 5,000 NC residents are leaving the carceral system every year with thousands and thousands of dollars in drug tax debt even after they have already spent years in prison paying their debt to society with their lives. Even if a person gets found not guilty or their drug charges get dismissed in court, they can still be required to pay thousands of dollars for the drug tax. It’s time to repeal the drug tax in North Carolina!

1914
1914

The first federal version of a drug tax is introduced as the Harrison Act which levied a tax on opium and coca products and required people in possession to register their names with the IRS.

Photo Source: New York Law School Digital Commons

1981
1981

President Reagan assumes office and massively expands the War on Drugs

 

Photo Source: Library of Congress

1983

Arizona institutes the first drug tax to penalize people who evade criminal charges

 

1989

NC and several other states follow suit, pass drug tax acts

1995

Most states start repealing drug tax acts, meanwhile NC’s general assembly (1) made the drug tax payable upon receipt of drugs rather than upon a criminal violation; (2) lowered the tax on various drugs; (3) repealed the section that made the violation of the drug tax a Class I felony; and (4) lowered the interest and penalty applicable when a dealer fails to pay the tax within 45 days of receiving the drugs from 100% to 50%.

The state also added constructive possession to the drug possession requirement meaning that the illegal substance does not have to be found on your actual body, but can be discovered near you, where you can easily access or have control over

 N.C. GEN. STAT. §§ 105-113.106, -113.107, -113.110, 113.110(A) (1994), amended by An Act to Revise the Controlled Substance Excise Tax, Ch. 340, H.B. No. 123 (1995).

1997

The General Assembly amends NC’s drug tax law to  include previously unaccounted for substances, such as mash and illicit beverages.

1998

The court of appeals ruled that NC’s drug tax was actually a criminal penalty and not just a tax, thus it was not in compliance with the constitution’s double jeopardy clause. Instead of getting rid of the drug tax, NC’s General assembly amends the law yet again, making the following changes: 

(1) lowered the rate at which it taxed cocaine from $200 per gram to $50 per gram; (2) lowered the rate at which it taxed drugs based on dosage units from $400 per 10 dosage units to $200 per 10 dosage units; and (3) completely abolished the special penalty and interest section and replaced it with the general interest and penalty provisions applicable to all taxes paid in North Carolina, effectively reducing the penalty for late payment from 50% to 10-40%.

2010

Only 109 stamps have been purchased in NC since 1989, mostly by stamp collectors. An NC DEpartment of Revenue official reported that the department had issued an assessment as high as $5 million

2020

Only 321 stamps have been sold since 1990 totaling $36,006.18 in revenue and $1,161,49 per year on average. Experts propose that most of the purchased stamps were bought by stamp collectors

2022

The city council in Wilmington, NC voted in favor of allocating $40,000 of drug tax money to build a Law Enforcement Museum at the WIlmington Police Department

 The drug tax still exists and continues to harm many NC families