Senator Debbie Clary

December Newsletter

Debbie.Clary@ncleg.net  919.715.3038

From the desk of Senator Debbie Clary…

I hope everyone had a relaxing Thanksgiving Holiday!  It is just a few short weeks until the Winter Holiday Season.  In our Special mid-November Newsletter, we briefly updated you on the recent “push” for Tax Reform.  Provided by the Interim Joint House and Senate Finance Committee, the information below provides an interesting perspective on the NC Sales Tax Rate and its evolution over time. 

A Historical Look at Taxes 

YEAR	EVENT(S)
1777	Property Tax enacted
1839	State Financed Free Public Education
1921	Major Tax Reform: State programs funded with local taxes; Segregated State & Local taxes; Relied on Income, Inheritance, Franchise, and License taxes for funding
1931	Tax Increases (Property) to pay for Schools, Roads, & Prisons
1933	First NC Sales Tax: Emergency Revenue Act; 3% Temporary Sales Tax on all tangible personal property except meat, bread, and flour; Alcohol Tax
1939	Sales Tax made permanent; Use Tax Article Enacted Exemptions: horses, mules, coffins
1941	Exempt Food
1945	Exempt Prescription Drugs
1947	Exempt Fuel sold to farmers
1951	Sales Tax Study: Recommendation to Extend Sales Tax to: All forms of Amusement and Entertainment; Lodging Accommodations; Automotive Service and Repairs; Repair Services to plumbing, electrical, heating, and air conditioning equipment
1961	Food Exemption Repealed
1971	1¢ Local Sales Tax Authorization
1983-85	Two additional ½¢ Local Sales Tax Authorizations; Food purchased on Food Stamps Exempt; Sales Tax on Utilities; Tax on Vehicles, Planes, Boats, Railway Cars
1987	Merchants Discount Repealed
1989	Sales Tax on Vehicles Replaced with Highway Use Tax
1991	Sales Tax Rate Increased to 4%
1998	Exempt Food
2001	Third ½¢ Local Sales Tax Authorization; Rate Increases; Sales Tax Holidays; Tax on Video programming
2009	Expand Tax to Digital Products

 

Sales Tax Revenue

Fiscal Year	Sales Tax Revenue
1933-34	$6,011,700
1940-41	14,256,941
1949-50	41,869,874
1970-71	285,893,056
1980-81	737,098,123
1990-91	1,682,340,881
2000-01	3,435,558,577
2008-09	4,677,961,056

 

Rate Changes 

 1933:      3% sales tax rate

 1991:      4% sales tax rate

 2001:     4.5% sales tax rate, temporary

 2006:     4.25% sales tax rate, temporary

 2007:     4.25% sales tax rate, permanent

 2008:     4.5% sales tax rate, Medicaid swap

 2009:     5.5% sales tax rate, temporary

 2009:     5.75% sales tax rate, Medicaid Swap

 Current NC General Rate

 The General State Tax Rate is 5.75%.  The 1% increase enacted this year is scheduled to expire July 1, 2011.

 The Local Tax Rate varies:

– In 91 counties, the rate is 2%, for a combined State and local rate of 7.75%.

– In Alexander, Catawba, Cumberland, Haywood, Martin, Pitt, Sampson, and Surry, the rate is 2.25%, for a combined State and local rate of 8%.

– In Mecklenburg, the rate is 2.5%, for a combined State and local rate of 8.25%

 Items that are subject to state sales tax are also subject to the local sales and use tax. 

Food Exemption 

Food for Home Consumption Exempt (from State rates; however, a 2% Local Rate remains) unless it is defined as:

– Dietary supplement – Vending machine item – Prepared food – Soft drink – Candy 

Food for Home Consumption looses its State Sales Tax Exemption if:

– It is sold in a heated state – It consists of two or more foods – Foods are mixed or combined by retailer – It is sold with eating utensils 

Current Economic Development Exemptions

 Major Recycling Facilities

 Interstate Air Couriers

 Interstate Air Passenger Carriers

 Interstate Air Businesses

 Datacenters

 Railroad Intermodal Facilities

The complexity and inefficiency of our current tax code system results from a disregard for responsible spending.  Instead of focusing on how to expand our Sales Tax Rate, we should be turning to a “reformed” system of budgeting.  As Winston Churchill once said, “We contend that for a nation to try to tax itself into prosperity is … like a man standing in a bucket and trying to lift himself up by the handle.”  We, as both a State and a Nation, need to step out of the bucket and turn our focus to unemployment.  Are increasing Sales Tax Rates going to help address unemployment?  Unfortunately, NO!  These increasing rates are only going to fuel more unaccountable and inefficient spending and increase the overwhelming tax burden on all North Carolinians.

Want to see back issues of Senator Clary’s Newsletters or view interesting News Clips? …

Please visit our site at:  www.senatorclary.com.  Also, please refer to our website to see both the tax reform and small business press releases.

Monthly Mailings

Now that the session has come to an official adjournment until May, 2010, we will be sending the e-Newsletter monthly instead of weekly.  During the interim, I am in the district working on constituent issues as well as my business, Millennium Marketing and MMG LIVE Networking.  The Raleigh office will remain open Monday thru Friday with my Legislative Assistant, Misty Greene.  You can reach us at debbie.clary@ncleg.net or debbie@senatorclary.com or if you prefer to call, the number is 919.715.3038.  We check our mail daily and will get back to you as soon as possible.  I would like to emphasize how thankful I am for your readership, comments, and input throughout the “long session.” 

Thanks as always for your support and for the honor and privilege of serving as your Senator!