The General Assembly was not able to pass tax reform during their legislative session this year. The tax increases was Governor Bev Perdue's answer to addressing the massive budget deficit.
The new sales tax increase will raise Mecklenburg County's sales tax to 8.25% the highest in the state and 7.75% for the rest of the state. The Governor expects the 1% tax increase to raise $803.5 million dollars in revenue for the state government. Governor Perdue has stated that this increase will help to keep teachers and other state employees on the job.
With the economy the way it is there are many people who question if this increase in revenue will happen. North Carolina has been hit hard the past several years and has one of the highest unemployment rates in the county. A rate that many feel is drastically lower than reality since many of those unemployed have ran out of the unemployment benefits and is no longer counted in the unemployment rates.
Many of those that are still working have seen a decrease in hours and have less to money to spend. The increase taxes will just add to their burden of being able to purchase items they need could prevent them from purchasing items they want. Like a domino effect, this will increase those that have less income coming in or even more people out of work.
The new sales tax increase is expected to cost most taxpayers around $150-$200 more a year. The 1% tax increase is scheduled to expire in July 2011. Shoppers in North Carolina are still paying the sales tax increase that was labeled temporary when it was put into place in 2001.
The sin taxes are for tobacco and alcohol products. Starting on September 1st it will cost 45 cent more to purchase a pack of cigarettes in North Carolina. Other tobacco products are increasing 12.8%. Purchases of alcoholic beverages will also increase with a sales tax increase that varies based on the type of alcohol it is.
The State of North Carolina is facing a massive budget shortfall. The new increase of taxes is an attempt to address the budget deficit. The question many people have is with the new sales tax and sin tax increase in September, will the state government actually end up receiving less revenue since people will be paying more taxes and have less to spend on other items. Only time will tell.