State Lawmakers In Battle Over Half-Cent Tax Increase

The Johnston County town of Smithfield lost $160,000. Town Manager Pete Connet said a local option sales tax would ease the pressure of having to raise property taxes again.

"Of course, the sales tax would help us. It would be the equivalent of 6 cents on the tax rate for next year," he said.

Rep. Leo Daughtry, R-Smithfield, wanted a sales tax swap with local governments, but state budget negotiators could not come up with a deal.

"You know we have all sent signals that we want to help the towns and counties. The money that they should have gotten was stolen by the governor," he said.

Daughtry predicts a tough floor fight to raise taxes.

"There is no reason to raise an additional half-cent in this recession," he said.

Several Smithfield residents are split on the issue.

"I'd rather have a half-cent on sales tax than raise property taxes," resident Vernon Creech said.

"I don't like it. It sucks. We pay enough taxes already if they were doing what they were supposed to be doing to start with, this wouldn't be happening," store clerk Jeannie Martinez said.

Right now, North Carolina has the 16th highest sales tax in the country. In Tennessee, lawmakers just raised the state's sales tax from 6 percent to 7 percent to deal with a similar budget crisis. Tennessee is also a state where there is no state income tax.

In Virginia, the sales tax is 4.5 percent with local governments getting 1 percent and the rest going to the state. South Carolina works the same way as Virginia with a 5 percent sales tax. Counties can also collect an additional 1 percent if voters approve the measure.

Alaska, Oregon, New Hampshire, Delaware, and Montana are the only states that don't have a sales tax. However, several boroughs and cities in Alaska have their own local sales taxes.