North Carolinians are paying more in sales taxes than they did a few years ago. Lower income North Carolinians continue to pay a larger share of their income in state and local taxes compared to the wealthy. This is a result of state leaders’ deliberate efforts to create a state tax system that relies much more on the sales tax and much less on income taxes. Consequently, the tax load has shifted to low- and middle-income taxpayers and away from the state’s highest income earners.
North Carolinians now pay sales tax on a number of activities and services that were not subject to sales tax prior to 2014. In recent years, the sales tax has been expanded to include more than 40 services that were either not taxed at all or only partially taxed prior to tax changes passed by lawmakers. And the list of services subject to sales tax will likely grow under tax changes pushed through by state leaders that give large income tax cuts to the wealthy and profitable corporations and swap in the sales tax, which disproportionately hits middle- and low-income taxpayers. And because state leaders have not put in place a strong Earned Income Tax Credit (EITC) to offset this swap, this means most North Carolinians will likely see even more of their income going to state and local sales taxes.
For the current fiscal year, North Carolinians will pay more than $500 million in additional revenue as a result of lawmakers expanding the sales tax base. For the upcoming fiscal that begins July 1st, nearly $640 million in additional revenue will be raised from expanding the sales tax. Read more