Articles
Extra Sales Tax for Counties
By: Paul Stam, Representative of the 37th District
Original: December 27, 2005
Updated: June 2006
Dear
Hon. Tony Gurley, Chair and Members of the
Wake County Commissioners
Hon. Patti Head, Chair and Members
of the Wake County Board of Education
Re: Sales Tax for School Construction
Gentlemen and Ladies:
Let me explain why I oppose the extra ½ cent sales tax for
school construction. The bill for that purpose passed the
House (Wake County’s inclusion was opposed by
Republicans) and is pending in the Senate for the Short
Session. It is unclear whether the lottery’s passage
will stop that particular bill.
First, a sales tax is regressive. I do not know any policy
reason why we would want to build schools for children with
a regressive tax. It is not a user fee in any sense. And
North Carolina already has a super high sales tax rate.
Second, a sales tax is highly inefficient. When choosing
what taxes are required in order to fund a given level of
expenditures, tax efficiency must be considered. For most
of the income taxes paid by North Carolina taxpayers the
sales tax is non-deductible against federal income tax.
Most taxes cost about 1% to collect. Because of its
non-deductibility, from the point-of-view of the taxpayer
the sales tax has a 20% cost of collection because 15%
extra will go to Washington, DC and about 5% to state
government. This means that the counties that adopt the ½
cent sales tax will be subsidizing the other states in the
nation and will be subsidizing, to a lesser extent, the
North Carolina counties that do not adopt it. It is just
bad policy, at least until Congress changes the rules on
deductibility.
I was not elected to determine the overall revenues
collected for Wake County – you were. But I was
elected to have my say about the structure of taxation.
With North Carolina’s extremely high rate of sales
tax I just am not going to agree to increase it.
I also attach a copy of an article by Dr. Charles Liner
(from the Spring 2000 issue of Popular Government and
entitled “North Carolina’s Most Regressive
Taxes”) who explains the regressive nature of several
other ideas for “creative taxation” that make
little policy sense but are popular with the press..
With regards, I am
Sincerely yours,
Representative Paul Stam
P.O. Box 1600
Apex, NC 27502
Tel: 919-362-8873
Email: pauls@ncleg.net
The writer represents Southern Wake
County in the North Carolina House of
Representatives.
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