Senate Democrats are exploring the idea of overhauling the state’s tax system by lowering tax rates but expanding the sales tax, including to some services.
The plan, which has been shared with House members only this week, would lower the existing sales, income and corporate tax rates.
Democratic leaders emphasized that the tax rewriting is only an option at this point. They have not identified where the sales tax would expand but some possible services to be taxed, as identified by past study commissions, would be carpet cleaning or yard service.
The revamping would raise more money, but Democratic leaders have not reached the point of saying how much. They also emphasized that the additional funds would come from closing gaps in the tax code that some taxpayers were taking advantage of.
"Somebody who is now getting away with not paying, while other people pay more than their share, will pay more," said Sen. Dan Clodfelter, a Charlotte Democrat and co-chair of the Senate Finance Committee.
Republicans said more money sounds like a tax increase.
"The reason we have some of the fiscal problems we have now," said Senate Republican Leader Phil Berger, "is that Democrats have hiked taxes over the years and spent more money than is coming in."
More after the jump
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Clodfelter highlighted observations from commissions that have examined the tax code in the past and found inconsistencies, such as applying the sales tax to dry cleaning or diaper cleaning but not to carpet cleaning. A lawn mower is taxed but a lawn service is not.
"What can we do to clean up a lot of the things in the current revenue system that make it so riddled with holes that we have to have high tax rates?"
Senate leader Marc Basnight said he expects a squabble if an overhaul is proposed.
"Any kind of change, any leveling of the tax codes," Basnight said, "would create opponents and proponents."
Comments
Tax talk
April 7, 2009 - 2:51pm — baconmre: phil48
All sales taxes are not created equal. In NC, you pay sales tax on goods but not services. One of the main reasons (admittedly not the only one) sales taxes are regressive is that the wealthy spend a greater proportion of their income on services than on goods. If you taxed both, you could lower the overall rate, which would lower taxes on lower incomes and raise them on higher incomes. (And in NC, which is 33rd highest in taxation, the wealthy pay a lower proportion of their income overall than lower incomes.)
re: tangoz
Zero-based budgeting has pluses and minuses, but how does that affect tax reform? How much we should spend is one question, how we pay for it is another. I think tax reform is worth doing, although it doesn't solve the issue of figuring out how much we should spend.
Re: Tax talk in the Senate
April 2, 2009 - 10:58pm — phil48Democrats claim to advocate for the lower and working class, yet they try to shift the tax system towards sales taxes, which are regressive taxes.
Re: Tax talk in the Senate
April 2, 2009 - 8:34pm — tangozYes a lawn mower is taxed, but that mower of lawns already pays taxes on income earned. If you add a sales tax to that lawn mowing service, you create double and perhaps triple taxation.
All this is a tax increase if more taxes come in. The DEMOCRATS want to overhaul the tax code, yet do not want to return to zero based budgeting. What a bunch of tax and spend pinheads.