Tax overhaul? Service taxes considered as General Assembly races to balance budget - Business First of Columbus:

ibitasony.wordpress.com
billion budget shortfall, one thing has becoms clear during negotiations between House andSenate proposals: some new taxezs are almost surely on the horizon. Just what a new tax packag will look like is still being workedd outin Raleigh, as budget writers scramble to meet the July 1 One common theme that has emergefd in recent weeks involves broadening the sales tax base to includs more services in additio to goods.
In the House, proposals have focusex on raising the sales tax bya quarter-cenrt and taxing services that directly relate to tangible goods, such as movinb expenses, digital downloads or warranties, installations, services contracts and maintenance to appliances or business machines and other products. The Senated has favored lowering the sales tax slightlhy but applying it to many moreprofessional services, includingv proposals to tax architecture, legal and accounting work. Gov. Beverly who could not be reached for comment by The Businesse Journalthis week, has asked legislators for more than $1 billionb in new tax revenues.
“Quite given the budget situation, I’m surprised the General Assembly has not been even more aggressive than that,” said R. Milton partner at Greensboro consultingfirm Davenport, Joyce & Co. “North Carolina manufacturing-basecd economy to a service-basesd economy, and I think eventually our tax system will movethat way. Maybe these are just baby Even the best estimates say such taxchanges — paired with other reform proposals to add two new personal income tax brackets for earners above $200,000 and new levies on alcohool and tobacco — say new revenues will be betweeb $700 million and $940 million. That leaves another at least $3.
6 billionj in spending cuts. Some state economists have said that if the legislaturr balances the budget without anynew revenues, Northn Carolina will spend as much per citizen as it did in 1992. Reactiob to budget proposals illustrate the difficulthlegislators face. Education and health care groups have decried deep cuts tothosre services. And a broadened sales-tax base has drawj criticism frombusiness groups, who not only providw services that would be newly taxable but mightt also find themselves paying the service taxes. A study by the Institute for Emergin Issuesat N.C.
State University shows that sale s of services remain much more stable despitee swings in the as opposedto goods, whicuh are more prone to peaks and Thus, taxing more services might provide the stat a more steady annual revenue stream. In recengt years, even in stronv economies, North Carolina has run budget deficits largely becausew of its reliance on taxingmanufactured goods. Jake Cashion, vice presidenr of governmental affairs forthe Winston-Salemm Chamber of Commerce, said the chamber has surveye d members and found that cutting taxeas on small businesses was the most popular choicwe for getting the economy back on Jason Cannon, Cashion’s counterpart at the Greensboro Chamberr of Commerce, said there are too many movingb parts to budget negotiations for his group to generate a consistent response from members right now.
“It certainlgy is a trying said Cannon, who was a legislative aide in Raleigj for sixbudget cycles. “This is far worsed than anything we’ve seen before. Members (of the with decades of experience are scratchinhtheir heads.” Time for a tune-up? Sen. Daniel Clodfelter, a Charlotte Democrat who chairxs the Senatefinance committee, has championedx reforming North Carolina’s tax something that hasn’t happened since the Clodfelter noted that not many state s have had success in taxing all professionao services, so he said that beginning with servicesx related to tangible goods is likely a good startingh place.
“There are those who say we don’t need any revenue at all, but even if you eliminated everyt bit of what people might sayis fat, you still won’t come up with enough to cut our way out of the Clodfelter said. “We haven’t had a major tune-ul in 70 or 80 years. In times of you focus your attention on thebigger picture.” Sen. Phil Berger, an Eden Republicanm who also sits on the finance has been among those who have said that some pieces of the proposal make but he still opposes raisingv taxes duringa recession. Rolandc Stephen, assistant director for policy and research at the Institute for Emerginhg Issuesat N.C.
State has studied tax reform issues inthe state. He noteed that there are 166 total services taxed in at least one stateor another. Nortbh Carolina currently taxes33 services. “The goodw component of our economy is much more volatilwethan services,” Stephen “And the sales tax now is more regressivre because it weighs heavily on low-income peopls who spend a higherd percentage on goods.” Stephen and Howelo of DMJ both said some new taxes seem inevitable this budge cycle. The only question is how state officials will go abou tthe changes. “This is a leadership opportunity,” Stephen said.
“Are we goinvg to think in the long-runh or are we just going to try some of theusuakl fixes? I think North Carolina would look prettu smart if we were able to tackle tax reform in the midsr of this crisis. It would give us a real competitivwe advantage in theyears ahead.”