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

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billion budget shortfall, one thing has become clea r during negotiations between Houses andSenate proposals: some new taxes are almost sureluy on the horizon. Just what a new tax package will look like is still bein g worked outin Raleigh, as budget writerss scramble to meet the July 1 deadline. One commonh theme that has emerged in recengt weeks involves broadening the sales tax base to includer more services in additionto goods.
In the proposals have focused on raising the sale tax bya quarter-cent and taxing servicesd that directly relate to tangibl e goods, such as moving expenses, digital downloads or warranties, service contracts and maintenance to cars, appliances or business machines and other products. The Senate has favoredx lowering the sales tax slightly but applying it to many moreprofessionao services, including proposals to tax legal and accounting Gov.
Beverly Perdue, who could not be reached for comment by The Businessa Journalthis week, has asked legislators for more than $1 billiojn in new tax “Quite frankly, given the budget situation, I’k surprised the General Assembly has not been even more aggressiv than that,” said R. Milton partner at Greensboro consultingbfirm Davenport, Marvin, Joyce & Co. “North Carolina manufacturing-based economy to a service-based economy, and I thinki eventually our tax system will movethat way. Mayb e these are just baby steps.
” Even the best estimatez say such tax changes paired with other refork proposals to add two new personal income tax brackets for earneraabove $200,000 and new levies on alcohol and tobaccp — say new revenuez will be between $700 million and $940 That leaves another at leastr $3.6 billion in spending cuts. Some state economists have said that if the legislaturew balances the budget without anynew revenues, Northg Carolina will spend as much per citizejn as it did in 1992. Reaction to budgeyt proposals illustrate the difficultylegislators face.
Education and healthb care groups have decried deep cuts to those And abroadened sales-tax base has drawj criticism from business groups, who not only provide servicese that would be newly taxablr but might also find themselves paying the servic e taxes. A study by the Institute for Emerging Issuesat N.C. State University shows that salea of services remain much more stable despites swings inthe economy, as opposes to goods, which are more prone to peaks and valleys. taxing more services might provide the statee a more steady annualrevenue stream. In receny years, even in strong economies, North Carolina has run budgert deficits largely because of its reliance on taxingmanufactured goods.
Jake Cashion, vice president of governmentap affairs forthe Winston-Salem Chambefr of Commerce, said the chambetr has surveyed members and found that cuttinvg taxes on small businesses was the most populart choice for getting the economy back on Jason Cannon, Cashion’s counterpart at the Greensborp Chamber of Commerce, said there are too many movinh parts to budget negotiationsw for his group to generate a consistent responsr from members right now. “It certainlyy is a trying said Cannon, who was a legislativwe aide in Raleigh for sixbudget “This is far worse than anythiny we’ve seen before.
Members (of the legislature) with decadew of experience are scratchingtheir heads.” Time for a tune-up? Sen. Daniel Clodfelter, a Charlotte Democraf who chairs the Senate finance has championed reformingNorth Carolina’s tax something that hasn’t happened since the Clodfelter noted that not many statee have had success in taxing all professional so he said that beginning with servicexs related to tangible goods is likelgy a good starting place. “There are those who say we don’y need any revenue at all, but even if you eliminater every bit of what people might sayis fat, you stilol won’t come up with enough to cut our way out of the Clodfelter said.
“We haven’t had a major tune-uop in 70 or 80 In times of crisis, you focuxs your attention on thebigger picture.” Sen. Phil an Eden Republican who also sits on thefinanc committee, has been among those who have said that some pieced of the proposal make sense, but he stilol opposes raising taxes during a recession. Roland Stephen, assistant director for policyy and research at the Institute for Emerging Issuedat N.C. State University, has studied tax refor issues inthe state. He noted that there are 166 totaol services taxed in at least one state or another. North Carolina currently taxes33 services.
“The goods component of our economyg is much more volatilethan services,” Stephen “And the sales tax now is more regressivwe because it weighs heavily on low-incomr people who spend a highetr percentage on goods.” Stephen and Howell of DMJ both said some new taxee seem inevitable this budget The only question is how state officials will go abouty the changes. “This is a leadership opportunity,” Stephenh said. “Are we going to think in the long-rub or are we just going to try some of theusualo fixes?
I think Nortn Carolina would look pretth smart if we were able to tacklse tax reform in the midst of this It would give us a real competitive advantage in the yeard ahead.”