Sales tax now collected on more things in NC

State and local sales tax is now collected on some labor charges. In Wake County, that's an extra 6.75 percent for a mechanic's time or the installation fees charged by Home Depot, Lowe's Home Improvement and others.

The tax is expected to generate about $166 million in revenue for the state, but Republican lawmakers who authored the change as part of the 2015-16 state budget say it will be offset by other tax cuts.

"For the average taxpayer in North Carolina, we have saved them significantly and will continue to do so," said Rep. Jason Saine, R-Lincoln, referring to income tax cuts that also were part of the budget.

GOP-backed tax cuts have resulted in $2.66 billion less in taxes being collected since 2011, Saine said.

Sen. Bob Rucho, R-Mecklenburg, said the sales tax expansion is a necessary part of a shift from an income tax-based system to a consumption tax system that he says is better for job creation.

"We changed the system around to a pro-growth economic model. We see an increase in wages, in employment, just in overall opportunity for people," Rucho said. "The numbers don’t lie. Income is going up. Every North Carolina family at every income has seen their taxes go down."

Democrats argue that's not the case. Sen. Mike Woodard, D-Durham, said the income tax cut is saving the average family in the state only about $50 a year.

"I'm sorry, it's not there," Woodard said of the impact of the income tax cut. "You need a magnifying glass to see it in your paycheck, and you're losing it with this tax scheme that took effect today."

When the repeal of tax credits for child care and earned income are added in, the poor are paying more, he said.

"The Republican budget with its flawed tax scheme is nickel-and-diming North Carolina's middle- and low-income families," he said.

House Minority Leader Larry Hall said sales taxes hit low-income families harder as a percentage of their budget. He called the shift from income taxes to consumption taxes a bait and switch.

"Our working poor are subsidizing big tax cuts for the well-to-do," said Hall, D-Durham.

Republican lawmakers said they're considering more income tax cuts in the coming session, but Democrats said the state should use any additional money in the budget to increase pay for teachers and state employees.