by Julie Tisdale
City & County Policy Analyst
With six weeks to go until the May primaries, voters in at least a dozen North Carolina counties should start considering whether they should vote for or against proposed sales taxes.
To hear county commissioners talk about it, you’d think the tax increases would be insignificant – just a few pennies that families won’t even notice. It’s only one-quarter of 1 percent added to the sales tax, right?
But here’s the thing. Pennies do matter. That’s why my mother always carried around a little organizer full of coupons when I was a kid. It’s why people love cash-back credit cards. And it’s why people put their pocket change into a jar every evening.
The pennies add up. No one coupon is going to help make ends meet, but when you use them on every shopping trip, the savings can be tremendous. When you put spare coins into a jar day after day, well, you get the idea.
The impact of a sales tax increase starts to make a difference when it’s collected every week for nearly every purchase, ranging from school supplies to the washing machine that has to be replaced. There’s an expression about being nickeled-and-dimed to death. That’s what this sales tax increase would do.
Worse, it’s regressive, that is, the people hit hardest are people who have the least, such as single parents, working class families, and those who have fixed incomes. Politicians may have enough wiggle room in their personal budgets to care little about the extra tax. But that’s not the case for single moms working two jobs to try to make ends meet. It’s not the case for seniors or the disabled trying to scrape by on fixed incomes. It’s those people, the poorest and most vulnerable, who are hit the hardest by a sales tax increase.
And that’s before we even get to the research on the wider economic effects of sales tax increases, particularly when they’re implemented in one jurisdiction but not in a neighboring one, which is precisely what these referenda would do. Academic literature shows that when sales taxes increase, sales decrease, as do wages and employment. When possible, people will cross county lines to avoid a higher tax rate, particularly on big-ticket items. And they’ll increase their online shopping to try to avoid higher tax rates. That may harm local economies.
I understand the appeal of this tax increase for local governments. It seems like such an easy way to get a quick bump in revenue. It’s certainly far easier than making tough choices about spending. But what’s good for local economies, and for local residents, is to keep tax rates low. That should be the aim of local governments.