I have a confession: even though I work in the news industry, I don’t always keep up with news that happens far from me.
I keep up with happenings in Mount Airy and Surry County. But I can sometimes fall a bit behind in keeping up with state and national politics — except for the elections that were forced down our throats.
So I wasn’t fully aware of all the changes made to the state tax code last year — which has just gone into effect at the start of this month.
Some of it sounds good. The state income tax rate dropped from 5.75 percent to 5.499 percent, while the amount of income that is exempt from taxes went up $500.
Let’s say husband and wife combined to make $40,000 last year. The first $15,000 is exempt, then the rest is taxed at 5.75 percent, which comes to $1,437.50. That same income this year would amount to taxes of $1,347.26. That is a savings of $90 in taxes.
That’s the good. However, there is plenty of bad.
While the tax rate is going down a quarter of one percent point for you and me, corporations are getting a full percentage point. That is even more pronounced when you look at it as the percent of change.
The tax rate for businesses dropped from 4 percent to 3. That is a reduction of 25 percent.
The personal rate going from 5.75 percent to 5.499 is a reduction of only 4.37 percent. So businesses get a reduction of 25 percent, and we get 4.37.
Regular folks now are paying nearly twice the tax rate as the businesses that employ them. Fourty-two states have a higher rate than North Carolina.
That $90 a year for a family with $40,000 in income is nothing compared to the millions from the corporate tax break. And how will the government make up that shortfall? By making us pay new taxes in other areas.
The state now collect sales tax on services like getting your car repaired, your HVAC serviced or a new washer/dryer installed. Additionally, some service contracts for monitoring or inspecting property are also now taxable.
An article on Forbes.com frowned on this service tax, saying it was double dipping since the customer is already paying a sales tax on the goods themselves. The article from contributor David Brunori also noted that the state has extended preservation tax credits.
“Nothing says boondoggle like giving rich folks tax dollars to fancy up old buildings,” Brunori wrote.
N.C. Sen. Shirley Randleman said the heavier reliance on sales tax allows all state residents to share in the burden. In the past, those who work and own property have footed the vast majority of the bill for government services.
Those who work — that’s an interesting choice of words.
She’s absolutely right. Some folks have money coming in, but aren’t working for it. Like my neighbor who is 77 and retired. Or another neighbor with a heart condition on disability. Or the guy who got laid off and is surviving off unemployment for a couple of months. Or that mother of four who has a part-time job, but also gets government assistance.
The elderly, the disabled and the unemployed aren’t paying their fair share of income tax, so let’s tax them more for things they need.
And let’s not forget a few points. Sure, I have a bad back, but if my car breaks down, I’m still able to hobble around in the garage and get it running again. I can avoid the new mechanic service tax by doing the job myself. My 77-year-old neighbor can’t do that. She can’t climb up on her roof or move a fridge, either. She has to pay someone else to do that, and now she has to pay more.
There is a term called disposable income. It’s the money left over once you’ve paid all your monthly bills. The money that you can afford to blow for fun like going to the movies, taking a trip or (in my case) some new piece of guitar equipment.
The average working Joe who retires or is laid off or is out on disability doesn’t have disposable income. That check is already committed to bills before it is ever cashed. An upper-middle-class family has plenty of disposable income and can make a choice as to whether to save it or spend it. The poor don’t have any choice.
And yet state politicians like Randleman and Rep. Sarah Stevens think that increasing sales taxes is the way to make funding government more “fair.”
One more tiny point. When a lower-income person pays in income tax during the year, there is a good chance a portion of that money will be refunded from the IRS. With the tax burden shifting to sales and service taxes, there is no chance of getting a tax refund.
Add to this the cut in unemployment benefits in 2013, and the “education lottery” (which is really a tax on the poor/desperate). It’s obvious that the people who have it the worst aren’t being represented at the state level.
Jeff is the associate editor and can be reached at 415-4692.