North Carolina Budget Shifts From Income to Sales Tax Reliance
The new state budget signed into law Friday includes about $400 million in income tax cuts, which will be offset by new sales taxes on repair, installation and maintenance services.
Whether this year’s budget will save you money or tax you more depends on how much you make, and how much money you spend on the newly taxable services.
The income tax cuts are relatively modest for low-income taxpayers: About $50 or less for households with less than $30,000 a year in income. But because those families owe about $500 or less in state taxes, the cut amounts to about 10 percent of their tax burden, according to projections from the legislature’s nonpartisan research staff.
Taxpayers receiving a $50 cut won’t benefit from the lower rate if they spend more than $750 on repair, maintenance or installation fees during that calendar year. The 6.75 percent sales tax rate in many counties will increase the cost of a $750 repair to $800.
“I’m just a little concerned about expanding the sales tax, especially down in rural areas,” said Rep. Ken Waddell, a Columbus County Democrat who voted for the budget despite his concerns. “It’s going to cause a lot of heartburn when they don’t have a lot of money to spend in the first place.”