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Drug Money: North Carolina’s little-known tax on illegal drugs and alcohol

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If you ask law enforcement, the North Carolina Unauthorized Substance Tax provides valuable revenue without burdening taxpayers, and only punishes people participating in criminal activity. But the reality is more complicated. Sometimes, yes, it’s a drug trafficker, rightfully convicted, who ends up paying these fines. But sometimes, it’s a family member that suffers — and sometimes it’s a totally innocent person. On this episode, we unpack the complicated legacy of a tax law many people don’t even know exists.

On this week’s show: the North Carolina Unauthorized Substance Tax, or the NC Drug Tax.

If you haven’t heard about it, you’re not alone. We actually first started looking into it last month, after the Wilmington Police Department asked city council to use $40,000 in the substance tax revenue to build a museum (council delayed the decision to next week).

Related: WPD wants to use $40,000 in NC drug tax to start ‘law enforcement museum’

If you have heard about the tax, you probably know that while law enforcement considers it a valuable funding source, critics call it a predatory tax that targets poor and marginalized communities.

The drug tax is assessed when someone gets arrested with illegal or illicit drugs and alcohol in their possession — but the tax doesn’t go away if those charges are changed or dropped. And they grow, with fines and interest, which the state can recoup by garnishing paychecks, and taking property.

We’ll talk to Phil Dixon, an expert on criminal defense who educates public defenders at UNC's School of Government, about how that works. We'll also talk to Daquan Peters, an advocate with NC Second Chance Alliance who has seen first-hand how the law has haunted both guilty and innocent people.

And, while local law enforcement declined to give interviews on the drug tax, we’ll do our best to present what the benefits are.

Links and resources:

Below: A North Carolina unauthorized substance tax stamp

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Benjamin Schachtman
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WHQR
Tax stamp for one gallon of illicit mash, paid in cash.