by Becki Gray
Former Senior Vice President, John Locke Foundation
As Donna Martinez reported shortly after the sales tax holiday went into effect in 2003, it was all a gimmick. A “shiny object” to distract North Carolina taxpayers from the real fact – a big increase in the state’s sales tax rate.
In 2001, Governor Mike Easley and a democratic led General Assembly raised North Carolina’s sales tax from 4 cents to 4 ½ cents, a $427M hit on North Carolina taxpayers. At the same time, they enacted a sales tax holiday – three days of no sales tax on certain items.
The pitch went something like this…Wait – don’t pay attention to the $427M sales tax hike that will cost you all year. No, no, no. Look over here – shiny object – at the spiffy-do sales tax holiday (bells, whistles, music, flashy ads) where you “save”, “get a break”, “a holiday”. Taypayers “saved” $13.6M in 2012 and are hoping for $13.4M this year. What a deal, right? Not so much.
The 2001 sales tax hike was supposed to be temporary and was actually cut ¼ cent in 2006, then raised back to 4 ½ cents in 2008, to 5.5 cents in 2009 (temporary, again, ha!) and then to 5.75 cents later in 2009. When Republicans took over the General Assembly in 2010, they reduced the rate to 4.75 cents, in spite of then Governor Beverly Perdue’s push to raise the sales tax yet again.
In an effort to take the focus off the large and steady increases in the (very regressive) sales tax rate, there was a “break” offered – one weekend out of the year that some items would not be taxed. Because of these tax hikes, taxpayers paid $427M more in 2001-2 and NCGA Fiscal Research estimates each percentage of sales tax means about $800M in additional revenue from taxpayers. Hundreds of millions of dollars in tax hikes all year for a $13.4M “three day holiday”? And trying to sell it as a good deal. Hmmmm.
Let me tell you about a deal. During the 2013 session, Governor McCrory and the North Carolina General Assembly enacted tax reform that means a tax cut for North Carolina taxpayers that includes maintaining that low 4.75 cent sales tax rate and a broadening of the base. In all North Carolinians will see tax cuts- $86M in 2013-14 and when fully implemented a $450 tax cut – every year, all year. No gimmicks, no holidays, not a distraction or shiny object. Just open, transparent and fair government. Now that’s an honest deal North Carolina taxpayers can live with.