As part of an effort to bridge the state’s $4.5 billion budget gap, sales taxes rose to 7.75 percent Sept. 1. Excise taxes on tobacco products and alcohol have gone up as well.
While the increase in sales tax amounts to just one penny, it comes at a time of economic stress for many families across the state.
“The thing about sales taxes is that they are regressive,” said Mark Kurt, an assistant professor of economics at Elon. “They tend to affect a percentage of families with lesser incomes disproportionately from those with higher incomes.”
In an interview with the Rocky Mount Telegram newspaper, N.C. State University economics professor Michael Walden estimates the increase in the sales tax could result in an additional $200 paid in taxes each year by each family.
Despite a struggling economy, Democrats in charge of the House and Senate along with the governor’s office insist the sales tax and other increases are necessary to avoid cuts to important programs. Many Republicans are arguing the state could have cut budgets and saved essential programs while avoiding more taxes.
“I think that the tax increase is necessary because with the current deficit, it’s our responsibility as involved citizens to ensure the state does not go bankrupt,” junior Jack Friedman said. “However, I think it should be the income tax that goes up because that way the rich are paying more than the poor.”
With the current shape of the state’s economy and high unemployment rate, which is now above 10 percent, the Democrats have had to answer many questions concerning the increases.
“Nobody wanted to raise taxes this time,” said Rep. Hugh Holliman, a Democrat from Lexington, in response to criticism about the recent increases. “But the alternatives were worse. We could have had a devastating impact on public education and community colleges.”
The excise tax on a pack of cigarettes rose 10 cents to 45 cents while a six-pack of beer will now cost five cents more, with corresponding increases on wine and liquor. The increases on beer, wine, liquor and tobacco is expected to generate more than $41 million in revenue.
“With tobacco, I would say that people with lesser incomes tend to smoke more,” Friedman said. “The problem with the excise tax might be that we’re getting money from lower income families. They should try taxing golf clubs or something.”
The higher sales taxes are considered temporary, though with the current economic slowdown affecting the state so much already many families may have to further tighten their budgets.
“Basically, every family is different,” Kurt said. “But many will now have to face changing their spending habit, or what they buy. At the end of the day, people may not be saving as much. The budget will just be tighter.”
© Copyright: September 9, 2009 Elon