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N.C. sales tax going up on Tuesday

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Comments (19)

Monday, August 31, 2009

(Updated Tuesday, September 1 - 12:24 am)

By Mark Binker
Staff Writer

RALEIGH — A pair of jeans, a new iPod and a six-pack of beer all got more expensive at 12:01 a.m. today.

North Carolina’s sales taxes rose by 1 penny today, increasing to 7.75 percent throughout most of the state, including Guilford and Rockingham counties. Excise taxes on tobacco products and alcoholic beverages also went up — all part of an effort to bridge what lawmakers described as a $4.5 billion budget gap this summer.

“You’ll see people making changes due to this tax, even though it’s small,” said Mark Kurt, an assistant professor of economics at Elon University. Extra pennies on a $20 purchase or $3 extra on a $300 sale may not seem a lot, he said. But every consumer has a different tipping point that changes what and how they’ll buy.

Those living near the border with Virginia, for example, might wait for their next trip into Danville before hitting the Walmart for new clothes.

Merchants worry that the higher taxes could cost them business in other ways.

“Instead of buying at a local convenience store, they will go to a Food Lion or a big box where they can get it cheaper,” said Chris Butler, co-owner of Bob’s Curb Mart on Phoenix Road in Greensboro. “The little guy doesn’t get the business. What I have to do to fight this, I have to treat my customers like gold. I have to give better customer service.”

Besides sales taxes, excise taxes on tobacco and alcohol have also gone up. The excise tax on a pack of cigarettes rises 10 cents to 45 cents with corresponding increases in other tobacco products. A six-pack of beer will cost about 5 cents more, with corresponding increases on wine and liquor.

“Our products are very price sensitive. We’ve seen that over the past year or so with the poor economy,” said Dean Plunkett, executive director of the N.C. Beer and Wine Wholesalers. “People have been trading down. They buy less expensive products, both in beer and wine.”

Those products, he said, will take a double hit from the tax increases. Excise taxes raise the wholesale price a retailer pays. That means the end-customer will likely pay a higher sales tax rate on a product that already costs more, he said.

A spokeswoman for Food Lion said the grocery chain had a well-tested system used to update the computerized cash registers at its stores. But managers at some stand-alone shops or small chains were planning to stay up late Monday preparing for the change in sales tax rates.

“If you’re an independent store, you’re often times trying to get the guy who does your POS — point of sales — system out to your store at the same time everyone else is,” said Andy Ellen, a lobbyist with the N.C. Retail Merchants Association. Ellen said merchants will face another change in a month. Although consumers won’t see the difference, on Oct. 1, the proportion of sales tax that goes to local government and the state will shift by a quarter-cent to the state, as a part of a previous Medicaid payment agreement.

One of the lingering questions over the sales tax increase might be the political calculus involved. Democrats who control the House, Senate and governor’s mansion insisted the sales tax and other changes were needed to avoid cuts to essential programs.

“Nobody wanted to raise taxes this time,” said Rep. Hugh Holliman, a Lexington Democrat. “But the alternatives were worse. We could have had a devastating impact on public education and community colleges.”

But Republicans argue that news reports of bloated administrative budgets and cost over-runs show that the state could have cut budgets, saved essential programs and avoided more taxes.

“There are evidently things we could have done without raising taxes and not impacted services at all,” said Rep. John Blust, a Greensboro Republican. Blust, who has long argued for changing how the state constructs its budgets, said the higher taxes could be part of the argument Republicans make to voters next year.

“I think people are upset we went the higher tax route,” Blust said.

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com

Accompanying Photos

Beer, wine, liquor and tobacco

Beer taxes will go up 5 cents on a six-pack, less than a penny a bottle/can. Unfortified wine will see a 4-cent increase per bottle. Fortified wine will go to 29.34 cents per liter. This will raise an extra $2.9 million. Liquor sold in Alcoholic Beverage Control stores increases from 25 percent of the retail price to 30 percent. Cigarette taxes will go up from 35 cents per pack to 45 cents per pack. This will raise an extra $33.3 million in revenue. The tax on cigars, snuff and noncigarette tobacco products will increase from 10 percent of the “cost price” to 12.8 percent, generating an extra $5 million.

Sales and state income taxes

The sales tax rate throughout most of the state (including Guilford and Rockingham counties) is rising to 7.75 cents, combined local and state. That means if you’re buying something that costs $100, you’ll be paying $7.75 in sales tax. That would be $77.50 for a $1,000 item. This does not apply to nonprepared food items, such as milk. Individuals making more than $60,000 will pay a 2 percent surcharge on the amount of tax they pay to the state; 3 percent if an individual makes more than $150,000. There are comparable surcharges on those filing as heads of households and married filers. Surcharges apply to the taxes owed. Takes effect when people file income taxes next year

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hadit

August 31, 2009 - 10:22 am EDT

Didn't we (the general public) vote down the sales tax increase during the last election? Why do they keep telling us our vote is so important, if they are only going to ignore us. All the politicians said they would not raise taxes, but as far as I can see that's all they have done.

speakup2

August 31, 2009 - 11:28 am EDT

You are correct hadit!.....Also I have NEVER seen a Temporary Tax before in my life.

g_stu

August 31, 2009 - 12:20 pm EDT

No! The people voted for tax increases when they elected Bev.

Panacea

August 31, 2009 - 11:43 am EDT

We did indeed vote down a sales tax increase last year. They put it on the ballot cuz no one had the cahones to raise taxes. But the shortfall got so bad they didn't have any choice.

I too, don't expect it to be "temporary."

tonymo

August 31, 2009 - 3:16 pm EDT

Yes Panacea, they did have a choice, like we all make choices during diffucult times. They could have cut spending, they could have cut the payroll, they could have cut programs, just like the private sector had to do.

They could have stopped pouring our money down that black hole, our failed government schools, by reducing their, at the very least, non classroom personnel, particularly the massive number of administrators. Go look at the Catholic Diocese schools, where the kids actually get an education, and compare the number of administrators per 100 pupils against the number in the taxpayer supported monstrosity!

CUT the size of government, NOW! CUT the REDUNDANT programs, NOW! Cut the ALTERNATIVE schools for thugs who can't conform to polite society norms, NOW! STOP BUSING CHILDREN AWAY FROM SCHOOLS CLOSE TO THEIR HOMES, NOW!

It is long past time to dismantle our non-working government agencies and start over again. No more PROFESSIONAL politicians living off taxpayers for their entire lives! ONE four year term for ALL elected officials. NO health and retirement packges that are vastly superior to the average citizen's! Now!

james2000

August 31, 2009 - 3:48 pm EDT

Illiterati

August 31, 2009 - 8:32 pm EDT

Couldn't have said it better myself. Threatening cuts to schools and social services as if those are the only areas that can be cut is complete BS considering the myriad layers of redundancy that exist in our government. Politicians serving their own interests instead of letting us keep our hard-earned bucks seems to be the only truly bipartisan action in existence.

bottechia

August 31, 2009 - 11:49 am EDT

They"re just following Mike Easley in raising our cost whenever and wherever they can.

clay

August 31, 2009 - 11:50 am EDT

Another reason to buy on amazon.com (no sales tax) or to shop in Virginia where sales taxes are much lower.

laserguidedloogie

August 31, 2009 - 12:29 pm EDT

Because we must help the Poor. It's so very very important that we do so. Therefore, we are going to raise taxes on them. It's for their own good. Really. Honest injun. We visit them often, and wave to them as we pass them by. Nice people, the Poor. Really. It makes us feel sooooo good when we help the Poor. We sit around and talk about it. We listen earnestly to others talk about it on NPR. We write journal articles about it. It shows how special we are.

Helping the Poor I mean.

Ken
Laser Guided Loogie

Billy

August 31, 2009 - 12:36 pm EDT

Any time is bad timing for tax increases, I for one have noted how my local reps have voted on this issue and they are dead to me, no casting a vote here next time. Until someone at the State level grows a set and starts reducing the fat in Raleigh this is what we're stuck with, i.e. look at the UNC system article just written about how much their administration had grown over the last few years. People we are supporting their pay, their benefits etc. yet I for one haven't seen a change in how things have improved just gotten worse. No one is accountable for what they do in State or Local government anymore, but hey I know for a fact my brother-in-law is spending a week in Hawaii at a conference this month on our dime, he's retiring after 30 years next year and we can pay for that too. It's a big joke. Every administrator wants to be treated like a CEO and paid like one, and staffed like one all on our dime. Change people!! Only we can do it.

ncb

August 31, 2009 - 12:36 pm EDT

I'm so glad I'm out of NC and in a more tax friendly state. NC has now solidified its status as the Massachusetts of the South

Doug Johnson

August 31, 2009 - 1:14 pm EDT

I live close to the Virginia line, so needless to say I avoid NC like a plague!
We have no one to blame but ourselves, we keep election the tax and spend liberals.
Kay Hagan was queen of the Raleigh Mafia, and we send her to Washington to take care of the illegals, and put 1000 NC tobacco workers out of a job!

wolfpackgrad

August 31, 2009 - 1:39 pm EDT

I cant believe I avoided moving to DC/MD to be screwed by Perdue. Without the benefit of dinner and a show

CherylP25

August 31, 2009 - 1:45 pm EDT

I thought this was interesting...Tax Burden By State
If all other things are equal, a state with a lower burden is a more attractive place to retire than a state with a higher one. To get a true sense of which state is less expensive, you need to look at state and local tax burdens. Only then do the low tax states stand out.

It is estimated by the Tax Foundation that the nation as a whole will pay on average 9.7% of its income in state and local taxes in 2008, down from 9.9% in 2007 primarily because income grew faster than tax collections between 2007 and 2008.

New Jersey residents paid 11.8%, topping the charts. New Yorkers were close behind, paying 11.7%, and Connecticut was third at 11.1%. The top 10 were rounded out by Maryland (10.8%), Hawaii (10.6%), California (10.5%), Ohio (10.4%). Vermont (10.3%), Wisconsin (10.2%) and Rhode Island (10.2%).

Alaskans pay the least, 6.4 percent in 2008, but Nevada is close at 6.6 percent. In four states the residents pay between 7 and 8 percent of their income in state and local taxes: Wyoming (7.0%), Florida (7.4%), New Hampshire (7.6%) and South Dakota (7.9%). Four other states round out the bottom 10: Tennessee (8.3%), Texas (8.4%), Louisiana (8.4%) and Arizona (8.5%).

For more information about the tax burden in each state, click here. http://www.retirementliving.com/RLtaxes.html

whyus

August 31, 2009 - 2:42 pm EDT

I think the cost of taxes needs to be put into perspective. I would imagine if taxes were put to GOOD USE some would be willing to pay more. Also, some states don't have income taxes at all but derive their income from other sources (e.g, FL for example and tourism).

whyus

August 31, 2009 - 2:39 pm EDT

Is there a way we can have Bev Perdue impeached for deceptiveness regarding tax and spend, supporting education, etc. which are a bunch of lies? I suppose she is like any other politicial though.. will say or do anything to get elected. Perhaps she will be caught up in the Easley fiasco since they resided together in Raleigh.

swerdna

August 31, 2009 - 9:49 pm EDT

I'm not surprised at all! Democrates = tax and spend, tax and spend, tax and spend. This is true from the lowest state government to the obama czardom. A well holds just so much water, and eventually, they'll "go to the well" once too often and find the well is dry. This will put us all right where they want us: Dependent upon the government to survive. They'll OWN us all... even those who voted for "change."