Scott Mooneyham: Ruling lacks context on unequal taxation

The court decision raised important questions easily lost in both the subject matter and the legal process and language.

The subject matter was business incentives, and once again, the North Carolina Court of Appeals dismissed a lawsuit challenging the constitutionality of tax breaks and cash grants handed out by state government to lure new businesses.

The questions raised by the decision were more basic, cutting to core issues of representative democracy: When do citizens have the right to challenge the constitutionality of laws? At what point are we, as taxpayers or voters or citizens, damaged by legislative and executive branch actions that may not be constitutional?

The case raised these questions because a three-member panel of the Court of Appeals — Judges Sam Ervin IV, John Martin and Barbara Jackson — didn’t decide the lawsuit on its merits. Rather, the judges ruled that the three taxpayers suing to stop incentives given to a Google server farm did not have the legal standing to bring the suit.

Essentially, the court said that the taxpayers’ relationship to the Google award was far too general, that they couldn’t suffer specific damage simply because they pay taxes that might make up some fraction of the money going to Google.

Somehow the judges decided to look at the relationship from the wrong direction.

The issue isn’t that some portion of these three taxpayers’ payments to the state — be it a dollar, a penny or a fraction of a penny — went to Google, and therefore the state subjected them to unequal taxation.

Unequal taxation occurs on the front end, not the back end. The issue is the hole left by companies like Google who essentially pay no tax or less tax because of incentive legislation, and how that may cause other taxpayers to pay more.

Interestingly enough, the decision never makes mention of last year’s $1 billion tax hike.

More troubling, Ervin, the author of the opinion, never provides any context about who could ever bring such a lawsuit. Who, under this court’s view of legal standing and incentives, could challenge a law that was clearly drafted to benefit one and only one company?

If the answer can only be dreamed up in the theoretical — oh, you know, another search engine company opening a server farm that was going to invest a half billion dollars here and, because of some technicality, didn’t get incentives — then the decision on its face is bad law.

And if, based on court decisions, classes of taxpayers become so narrow as to undo the whole concept of unequal taxation, then the good judges might as well put a match to the state constitution.

Perhaps a business bringing the lawsuit might have been a more ideal plaintiff. But businesses and individuals pay sales tax, and state law makes no distinction between the rates.

If that doesn’t make me, and you, and every business and individual a “similarly situated taxpayer,” what does?

Scott Mooneyham writes about North Carolina government and politics for the Capitol Press Association.