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October 19, 2017

NC Sales Tax Increase Starts Today

Next time a repair is needed – from furniture to cell phones, to shoes – expect to pay a little more. Today, a new state sales tax on services begins in North Carolina.

The tax, passed last year, is around seven percent, depending on the county. It means a $500 car repair would cost an additional $37.

David Zoll, showroom manager for the Acoustic Corner music store in Black Mountain, says he’s not clear exactly where the additional money he’s collecting will go.

“That’s a good question,” says Zoll. “Who knows where it’s going at this point? I hope it’s going somewhere good. On a large repair, where the labor charge is big, it might hurt some folks.”

State lawmakers intended the new tax revenue to replace some of the money lost from income and corporate tax cuts from 2013 and last year.

Without those tax cuts, the state would have generated an additional $2.3 billion annually by 2019.

The state estimates the new services tax will raise just $159 million in its first full year.

The latest state income-tax cuts save about $500 for households making $95,000 a year, but only about $50 for someone making $30,000.

Cedric Johnson, public policy analyst with the NC Budget and Tax Center, calls it unfair that the new tax on repairs and services weighs more heavily on lower-income families.

“It disproportionately hits low and moderate-income North Carolina taxpayers in general the hardest,” he explains, “simply because they spend a much greater share of their income on things subject to the sales and excise tax.”

According to the U.S. Bureau of Labor Statistics, people with incomes of around $35,000 spend $630 a year on repairs and maintenance.

Johnson says the tax-code changes are bound to put a greater burden on the same households that also are more keenly affected by cuts to social safety-net programs with decreased state revenue.

“The tax shift is happening, and at the same time, with the massive revenue loss from the tax changes since 2013, we simply don’t have adequate revenues at the state level to invest in the things in local communities that drive local economies,” he says.

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