Local Politics

Senate's budget calls for reduction in state sales tax

Posted April 22, 2009

— The final version of a Senate plan to raise more than $500 million to help close the state's projected $3 billion budget deficit would decrease the state sales tax from 6.75 percent to 6 percent but broaden it to include some services not currently taxed.

Details of the plan released Wednesday also reduce the corporate tax rate from 5.8 percent to 4.5 percent over two years and increase the cigarette tax by 15 cents per pack and other tobacco products by 3 percent.

State budget Senate's budget would tax more services

Senate Finance Committee Co-Chairman Sen. Daniel Clodfelter, D-Mecklenburg, said that by broadening the tax base, every major tax rate is lowered, including the sales tax and income tax.

"Instead of some things being subject to a high sales tax, more things will be subject to a lower sales tax," Clodfelter said. "It's as simple as that."

Landscaping, pest control, home repairs and auto repairs would be among the services that would be taxed at a 6 percent rate, while professional services, such as legal assistance and accounting, would remain tax-free.

"Why do we have a tax on movie tickets but not admissions to amusement parks? We couldn't come up with a good reason for that, so we said that if we tax them both, we can lower the tax," Clodfelter said. "That's what we did. We picked services that are like services that are already subject to tax in North Carolina."

The Senate's plan to change and broaden the tax rate structure is different than that of Gov. Beverly Perdue. In her $21 billion budget proposal, she wants to bring in additional revenue by increasing the so-called sin tax on alcohol by 5 percent and cigarettes by $1 per pack.

The Senate has said that should not be the only new revenue source. While it would help fill the budget shortfall, the proposed change in the tax rate structure would help stabilize the state's revenue stream in the long-term.

"We've been patching that revenue system and putting Band-Aids on it and stitching it together and holding it together with string and baling wire," Clodfelter said.

What the plan does not do is get rid of the 2 percent groceries tax. Earlier versions of the plan called for lowering or eliminating it altogether.

Other changes include capping mortgage and charitable donation credits, taxing some nonprofits and implementing a franchise tax that would affect most businesses.

"The plan is going to get a huge amount of criticism, because so many people are involved," said Finance Committee member Sen. Neal Hunt, R-Wake. "Everybody's getting gored a little bit."

Hunt said he believes it is time to restructure the state's tax system, but he's not convinced the current Senate plan is the right one.

"You can poke holes in this thing all day," he said. "And it's easy for me to do that."

The Finance Committee co-chairs said they expect there will be changes to the plan. It could be two weeks or more before there is a vote.

51 Comments

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  • drose4814 Apr 23, 2009

    Flat Tax?

  • blueridgerunner Apr 23, 2009

    Poor decision making, endless wasteful bureaucracy, corrupt legislators, bad management, no real leadership and a spineless needy public all= higher taxes, larger government, more restrictions.

  • venitapeyton Apr 23, 2009

    If your nutty Senators think the jackleg mechanic who fixes my car in his yard or the beautician who perms my hair in her kitchen are going to tax me, keep dreaming. I guess we'll keep bartering.

  • nobama Apr 23, 2009

    Only a democrat could come up with a plan to lower taxes where in the end it ends up raising taxes. This is another reason I don't vote for democrats.

  • Iwasasoldier4u Apr 23, 2009

    Perdue calls them so called sin taxes. Okay that is fine so why doesn't she want to add prostitution to the list of taxable sins. After all the state taxes drug dealers that are caught selling their goods. What is the difference, they are both illegal. If you go to craigs list you can see that the fees the ladies of the evening charge for their services are far higher than a pack of cigarettes which by the way are still legal and the main ingredient largely grown here in NC. The whole tax system really stinks and it has come to us paying so many taxes I doubt if any one person can name all the taxes we pay on a day to day basis.

  • PirateHeist Apr 23, 2009

    smoke and mirrors... just follow the white rabbit, it will be over soon!

  • donnied1952 Apr 23, 2009

    Guess this reduction, if it happens, is just another way of giving our money to the illegals. Everyone has to eat so by reduing the food tax, they are making the taxes even more uneven. Maybe we should just stand at the store and wait for the illegals to come in and step up to the register for them. It's the same difference.
    I work all week because I have a lot of mouths to feed, illegal one.
    All you folks get to work now, we have a lot of people depending on us.

  • donnied1952 Apr 23, 2009

    Everyone that thinks they will LOWER any taxes, Raise their hand.

    Ok that's what I thought too.

    They may say they will lower the tax to 6%, but I wouldn't hold my breath.

    We are being taxed to death. Pretty soon socializm will take everything over and we won't even get a paycheck. It will all to to the better good of the government.

  • Dirty_Water Apr 23, 2009

    atozca wrote ==>
    This is bull and will be the straw that breaks the back of my business. We are in construction so we will have to charge homeowners tax on labor and of course pay income tax on that labor as well. I am already struggling competing with business owners using illegal labor and with this, I'll be competing with those who are willing to work under the table to avoid taxes. It is become more difficult to run a legit business and make a living.
    ------------------------

    Atozca, if you're paying income tax on your labor, you need a better accountant. You get to DEDUCT the cost of labor from your income. Further, paying anyone under the table will have NO impact on a sales tax, it will be added to the bill delivered to the customer and paid by the customer. You are just a "pass-through" agent.

  • atozca Apr 23, 2009

    "Cutting the food tax is absolutely ridiculous. It's the closest thing to a fair tax for all that we have. Because "everyone" has to eat. And since we have a large segment of the population that pays NO property taxes, income taxes and/or other taxes in general it should stay as it is." 19tarheel75

    DITTO!

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