Today North Carolinians will begin paying sales tax on various installation, repair and maintenance services on everything from appliances to musical instruments to vehicles. This modest expansion of the sales tax base was included in the state budget passed by state lawmakers last year and represents another step towards aligning the state’s tax code with a more service-based economy. Today, the purchase of services is far more common than the purchase of goods compared to prior periods and this economic activity trend is likely to continue.
The effort to better align the state’s tax code with a 21st century economy is important. However, proponents of the sales tax move have used this good tax policy to fuel far more bad ones. The sales tax base expansion is part of a larger transformation of the state’s tax code that shifts away from the income tax, which is a better tax policy tool for achieving long-term revenue adequacy via a structure that’s based on ability to pay. Furthermore, this shift away from the income tax and to a greater reliance on the sales tax fails to acknowledge the increased tax responsibility on low- and middle-income taxpayers and away from the wealthiest who have reaped the greatest benefits from tax changes since 2013.
State lawmakers continue to be susceptible to special interests and this was highlighted with decisions regarding the expansion of the sales tax. Read more