New sales taxes begin today, NC revenues are strong
Published March 1, 2016
Editorial by Greensboro News-Record, March 1, 2016.
North Carolina’s revenues are strong — and they’ll increase beginning today, thanks to a slew of new taxes.
Average folks might start wondering when they’re going to see the tax cuts they’ve heard so much about from the governor and state legislators.
Lower individual and corporate income-tax rates are real and have provided significant savings for businesses and people with high incomes.
State tax collections continue to grow because of the slow-but-steady economic recovery, which could be somewhat aided by those tax cuts. A lower cost of doing business promotes greater business activity, which in turn generates more tax revenue. How much impact tax policy has on economic growth, however, is hard to determine.
What’s much easier to see is that not everyone has gotten a tax windfall. Middle-income taxpayers, whose rates dropped less, have seen little gain. The working poor, who lost the earned income tax credit, haven’t fared well at all. In fact, they may be paying more in taxes, thanks to new taxes on sales and services.
The new taxes hitting today will add to the everyday cost of living. Car repairs and maintenance are now subject to state and local sales-tax levies. That includes everything from an oil change to a tune-up to a roadside service stop and tow. Previously, a new tire was taxed; now even the cost of mounting, balancing and aligning the tire is taxed.
Everyone needs car repairs occasionally. People of modest means are more likely to drive older cars that require more frequent repairs. They’ll feel the additional tax.
The N.C. Department of Revenue has published an extensive list of other items and services that are subject to new sales taxes — car washing, carpet installation, plumbing, heating and air conditioning work, shoe repair and more.
This was touted as tax reform — aligning the tax code with a service economy — but it’s also created confusion, especially in cases where service providers also sell goods.
“Thus far, it’s been a bit difficult to truly understand it,” Jim Pendergrass, executive director of the Plumbing-Heating-Cooling Contractors Association of North Carolina, told The News & Observer of Raleigh. “There seems to be a lot of exemptions and a lack of clarifications.”
It may be a matter of which special-interest groups prevailed during legislative debate.
But it’s not hard to understand the overall intent. The tax burden is shifting from income to consumption. Those who spend a greater share of their incomes on necessities end up paying more. The tax code is becoming more regressive.
Fees are following the same course. The price of car registrations and driver’s licenses has gone up. The state budget also demands more revenue from the legal system in the form of fines and court costs. The poor pay a large share of that revenue, too.
The state budget lays out leaders’ priorities. Overall revenue was expected to increase by 4.6 percent; corporate income tax collections actually were budgeted to decline a bit. But sales and use taxes were slated to rise by a whopping 8 percent. Some of that would be generated by growth in economic activity, but the state also is reaching a little deeper into consumers’ pockets in ways that will leave them with less money for their families.
Legislators plan to drive further down the road of tax reform. Some want to eliminate the corporate income tax and cut individual income-tax rates again. Measures that benefit the poor and the middle class are welcome, but that’s not the direction the state is taking.
Meanwhile, education, infrastructure and health care needs mount. Shifting the costs by taxing more goods and services puts a heavier burden on those who are least able to pay. Tax reform without tax fairness is misguided.
March 1, 2016 at 5:21 pm
bruce stanley says:
If I'm a poor person, which would I rather have, more job opportunity and a growing economy, a chance to be empowered and lifted out of poverty, due to the 2013 tax reform (and it's transformation from income tax to consumption tax), or to be required to pay sales tax on movie tickets and now also car washes, etc?
I wouldn't mind seeing the legislature take it one step further in the short session and add sales tax to legal and accounting fees. Perhaps that would make the consumption tax less likely to be branded by the left as regressive.
