Local Politics

Lawmakers: State tax reform unlikely in 2010

Posted December 28, 2009

— Much of the debate over how to erase a record budget deficit last summer centered on reforming the way the state charges sales tax. But lawmakers said such changes are unlikely in 2010 as lawmakers face re-election.

In recent decades, North Carolina's economy has shifted from its manufacturing roots to one that is more service-oriented. That has prompted some lawmakers to float the idea of rewriting the state tax code to reflect that.

Cash register, sales tax, retail sales Some lawmakers want to tax services

They argue that broadening the sales tax to include entertainment like golf or a service like professional lawn care or auto repair could lower the overall tax rate on goods.

"We want to know such things as what would be the impact on the average middle-class family," said Rep. Paul Luebke, D-Durham, who chairs the House Finance Committee.

Revising the tax system came closer than ever to passing last summer, with the $4.6 billion deficit forcing lawmakers to scramble for ways to generate revenue as well as cut spending.

Luebke said the historic change still needs more consideration and likely won't happen during an election year like 2010.

"If people go in the direction of political gamesmanship, it makes it much harder for the project to be implemented," he said.

The Federation of Tax Administrators last year surveyed the 45 states that charge sales tax and found that Hawaii taxes 160 of 168 services included in the survey, followed by New Mexico and Washington state at 158 taxed services each. North Carolina taxes 30 of the services.

Chris Fitzsimon, executive director of NC Policy Watch, a progressive think tank, said any tax proposal during an election year poses a political danger. Still, he said, budget shortfalls like the one seen this year and one projected for next year point to the need for a broader revenue stream.

"We've waited and waited, and now we're being told we need to wait again. I think the argument is exactly the opposite. Now is the time to do it," Fitzsimon said.

House Speaker Joe Hackney said lawmakers continue to work through the details of tax reform.

"Tax reform requires careful consideration and thought, which is exactly what we are giving it," Hackney said in a statement. "Ideally, both parties will come out in favor of any proposed overhaul, though at this time, it appears we lack the bipartisan support we would like to have to go forward."

Republicans said they fear reform proposals will only add to the tax burden North Carolina residents face.

"My primary worry is that there's no check on the growth of government spending, and there's no provision to save money," said Rep. Nelson Dollar, R-Wake. "In a recession, to say we're going to begin to tax all of those (things) you don't already pay taxes on, I don't see that happening in 2010."

Fitzsimon said the easiest thing for Republicans to do to block any reform effort "is to play politics and say no matter what they try to do it's bad policy."


This story is closed for comments.

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  • colliedave Dec 30, 2009

    how about an 100% tax on legal fees?

  • Just the facts mam Dec 29, 2009

    NC state Democrats just raised all of our taxes this year - what's the matter? Do you want to raise them even more???

  • wildcat Dec 29, 2009

    This is going to be a major problem for some. People depended on getting the tax forms for these places.

  • gov watchdog Dec 29, 2009

    The problem with taxing more services is that they will STILL raise our income taxes for any reason - they raised our taxes during the good times and they have raised them during this recession - is there ANY time that they will not raise income taxes??

  • SS67 Dec 29, 2009

    People are not going to be hired until the company feels like it can afford to and it is not going to feel it can afford to until it starts selling more of its product. The tax on small business has little to do about that. You're better off putting money in the hands of the buyers so they can by these goods. The proposal is a tax on services, not goods. We're operating on an outdated model and those elected for the job of fixing the system, republicans and democrats, don't feel it is worth fixing at the possible expense of losing an election.

  • whatusay Dec 29, 2009

    The backbone of any economy is it's manufacturing base. Service sectors exist to the point that there is nothing worth buying any longer. Without manufacturing the world economy will collapse. Government is strangling private business by over taxing and regulating them. Why has most of our manufactung base left the USA? Why are more and more businesses leaving every year? Government will eventually (almost there) run out of our money. As a whole democrats hate private business and capitalism. However, a government can not sustain itself after all the tax payers are gone.

  • T-3485 Dec 29, 2009

    Vote Vote Vote

  • miketroll3572 Dec 29, 2009

    WXYZ...... Now that hit the nail on the head!

  • rayzer Dec 29, 2009

    The best way to raise tax revenues is to decrease tax rates to encourage investment and PUT PEOPLE BACK TO WORK! (JFK & Ronald Reagan proved this) More workers = more tax revenue and less drain on the treasure from payouts to the unemployed. But don't expect the current ruling majority to comprehend this.

  • timothycapwell Dec 29, 2009

    2010 is a critical year for elections. We must take the state legislature back from the corrupt democrats and not allow them to gerrymander Congressional seats. They plan on decimating Virginia Foxx's and Sue Myricks' districts. We cannot allow that to happen.