Senate committee looking at broadening state sales tax

RALEIGH, N.C. — The state Senate Finance Committee worked Tuesday to finalize details of a proposed change in the state tax structure that would broaden the base of the sales tax and at the same time, trimming it by as much as one percent.

The plan, which could be released Wednesday, would likely reduce the state sales tax from 6.75 percent to 5.75 percent, lower the corporate income tax rate and potentially eliminate the 2 percent grocery tax.

But it would require a sales tax on some non-taxed services, such as landscaping, pest control and home repairs and auto repairs. Professional services, such as legal assistance and accounting would remain tax-free.

Gov. Beverly Perdue has already proposed in her $21 billion budget more than $500 million in additional revenue by increasing the so-called sin tax on alcohol by 5 percent and cigarettes by $1 a pack.

Sen. David Hoyle, D-Gaston, who co-chairs the committee, however, said Tuesday he doesn't think that should be the only new revenue source. Broadening the tax base has been up for discussion for more than 50 years, he added.

"We would be shifting, and we would be broadening," he said. "We're talking about lowering the sales tax potentially a full cent."

Perdue said Tuesday that she believes it is hard to support the idea given the state of the economy but will wait to pass judgment until the official tax proposal is released.

"I think it's a hard time to talk about any kind of broad-based taxes just because of the economy," she said.

Some business owners who would be effected by the tax change, however, said Tuesday they don't like it, because it would cut profits and put a higher tax burden on them..

"It'll hurt my clients' bottom lines, and my bottom line," said Chuck Wright, who owns a commercial lawn maintenance company. "Then, we all have to pass it down. I mean, nothing happens in a vacuum."

"Change is very hard, but it may be time to change," Hoyle said. "I think the long-range benefit for the state would be really, really good."