July 07, 2009

Tarheel Media Spin Hard to Cover Governor's 22% Sales Tax Increase

Influential North Carolina media like WRAL TV and the News and Observer seem intent on covering up a massive tax increase proposed by Governor Beverly Perdue.

First the spin from WRAL.

Trying to break a legislative stalemate on state budget negotiations, Gov. Beverly Perdue on Tuesday called top lawmakers to the Executive Mansion to lay out her own plan for raising extra revenue in the coming year to erase a projected $4.6 billion deficit.

Perdue called for raising the state sales tax by a penny for 13 months, beginning Sept. 1. The increase would raise more than half of the $1.6 billion in revenue she would like to include in the 2009-10 fiscal budget.

And now from the News and Observer:

Gov. Beverly Perdue told legislative leaders Tuesday she wants a 1-cent sales tax increase and a total tax hike package of $1.6 billion to balance the budget.

Perdue, a Democrat, met with lawmakers at the Executive Mansion and gave them a list of tax and other revenue options that she would like to see passed. It was an effort to help break the impasse between Democratic Senate and House leaders over what taxes to increase and how much.

Highlights of Perdue's wishlist, provided to Dome, include: an "emergency" 1-cent increase in the sales tax that would expire in October 2010, an emergency income tax surcharge on single taxpayers who earn more than $500,000 and married couples filing jointly making more than $1 million.

"Raising the state sales tax by a penny" or calling it a "1-cent increase" seems like small potatoes until you realize that North Carolina's current sales tax rate is already 4.5% and by raising the rate another cent—to 5.5%—Perdue is seeking a 22% sales tax increase.

Neither news outlet did the due diligence to point out the substantial rate increase the governor is pressing for instead of reigning in out-of-control government.

One can only speculate why that may be.

Posted by Confederate Yankee at July 7, 2009 08:04 PM

And this is one of the reasons that I am selling my house at a loss so I can move further south.

Posted by: Matt at July 7, 2009 10:02 PM

A temporary tax increase has a 99% chance of being permanent.

Posted by: Ken Hahn at July 8, 2009 12:55 AM

Make that 99.99% Ken.

Posted by: 1903A3 at July 8, 2009 06:12 AM

The reason is obvious: A 1 cent sales tax increase sounds much better than a 22% sales tax increase. It's also less alarming. Compared to the sales tax rates in the few states that don't have a state income tax, a 5.5% sales tax IS small potatoes. Granted, combined with your state income tax, it is an increase.

As for the state income tax surcharge on high income earners, not very many people are going to be concerned with that. That will be a non-issue for the vast majority of people.

Seems that everyone wants govt. services and low taxes. They want services curtailed as long as it doesn't effect them. My two cents worth.

Posted by: Dude at July 8, 2009 10:51 AM

4.5% is of course extremely low.
I'd jump at a 5.5% sales tax, would mean an 14.5% lower sales tax than we have here or a 60% (roughly) reduction.
Ain't gonna happen of course, in fact they want to raise it to 21% and boasted that they were so "generous" because they delayed the raise for a year "due to the economic crisis".

Posted by: J.T. Wenting at July 8, 2009 11:59 AM

As always, so glad I "weighed my options" and moved out of Charlotte to the less obnoxious state south of that border...

Posted by: jdb at July 8, 2009 12:29 PM

Added to the local county/city taxes, this "mere" one percent will raise the tax here to 7.7%. And of course, the news article glosses over all the additional goods and services Queen Beverly now wants to have taxed, raising the effective amount of taxes much higher. Past time to move!

Posted by: Candy at July 8, 2009 10:40 PM

"Raising the state sales tax by a penny" or calling it a "1-cent increase" seems like small potatoes ...

... because it is. This urge to express a tax rate change as a percentage of the previous tax rate is one that all sides would do better to resist. It reminds me of Benjamin Disraeli's line "there are three kinds of lies: lies, damned lies, and statistics." When your average joe realizes that the "22% tax increase" you're railing about is actually one penny on every dollar he spends, he's going to snort in disgust, and be that much less likely to listen to your antitax arguments next time. Call it what it is: a one percent increase, or a one cent increase.

Because the real issue is not how much the rate is going up. It's the fact that the rate is going up at all. At a time like this the state should be cutting spending, not raising tax rates and thus making recovery that much more difficult.

Posted by: wolfwalker at July 8, 2009 10:54 PM

You can assure yourselves that at the RECEIVING end this is indeed a "22% tax increase".

Posted by: Druid at July 8, 2009 11:42 PM

Speaking as one who audits such taxes for a state, Druid is correct. Though I'd clarify his the RECEIVING end this is indeed a "22% tax increase"
to "at the RECEIVING end this is indeed a 22% revenue increase from the sales/use tax".

Posted by: PhyCon at July 9, 2009 11:03 AM

So I'm does a 1 penny increase translate into a 1% increase?

Posted by: ConstanceRifle at July 9, 2009 01:18 PM

The increase is large only because the tax is low. The governor could not raise sales tax by less than a penny because one cent is the smallest denomination we have. In this case you are just trying to make a responsible move to cover the shortfall into some terrible tax grab.

I can understand legitimate criticism of the decision to raise the taxes over reducing the spending but you are just trying to be sensational now. Its the same reason I stopped reading the papers. The real information was not reflected by the headline given to it.

I have read your blog and several other blogs for a long time and it seems that after the election you guys went over the edge and have started to sound like all the nuts on DU and those various sites.

Posted by: alecthemad at July 9, 2009 03:31 PM

You always hear "well everyone wants government services, but don't want to be taxed" argument. That's not the problem! State Politicians will not make providing those "services" more cost efficient because they would have to fire public sector workers, cut their benefits and retirement programs.

All that has already happened to private enterprise - our health care benefits are 100% more expensive, our retirement plans are gone and we only have 401k's, we no longer have lifetime benefits, and we are asked to provide the same services to our companies as before.

Private companies are producing more with less people and less cost, but no one is willing to take on the State Employees Unions to get the same cost efficiencies in government.

If you are employed by the People (Government) doesn't mean you have a lifetime job, or better benefits than provided in private enterprise. Politicians need to step up.

Posted by: Jim at July 9, 2009 05:23 PM

Jim is precisely correct. The problem is thatthe only people really feeling the pain are the private sector employees. I have operateed a small business in NC for over 20 years now, and have yet to hear a Governor call for a substantial decrease in state employment.

As for the folks that say an increase to 5.5 % is small, tell that to people that scape by on an hourly wage. This isn't about sensationalizing a tax increase. It's about private secotr workers shouldering all the pain. In the unlikely event one of our homegrown idiot Democratic politicians evenly splits the budget shortfall between state employees and the rest of us...well shoot, that just ain't gonna happen.

Posted by: Chuck at July 9, 2009 06:54 PM

"at the RECEIVING end this is indeed a 22% revenue increase from the sales/use tax"

Depends on your definition of the "receiving" end.

Posted by: Druid at July 9, 2009 07:45 PM

A one-cent increase doesn't sound like much, until you go to buy a dependable used car and the tax goes up $100.

Posted by: MikeM at July 9, 2009 08:29 PM

The governor could not raise sales tax by less than a penny because one cent is the smallest denomination we have.

FYI - many sales taxes are fractional.

Posted by: Purple Avenger at July 9, 2009 10:24 PM

To purple avenger,

yea, gas tax and such. I get it.

It does not detract from my point and that of some other posters. Calling the increase 22%, while technically correct, is not aiding the debate.

The debate should not surround the size of the tax increase but the question of increasing taxes at all if money could be cut from the budget.

Being a resident of NC and a fan of small government I am certain that money could be cut if the political will could be mustered.

Wasting energy by shouting 22% sales tax increase does not decrease the tax burden. It just makes people happier to hear a lower percentage later on.

The percent of the increase should not matter.

Posted by: alecthemad at July 10, 2009 04:45 AM

The liberals here don't get it. This tax will kill my business. I just fired one manager and cut anothers salary in half cause I just can't afford them anymore. I haven't been able to pay myself in over a month and I'll be lucky to make $30,000 this year. What's my business? I own Tumbleweeds bar and grill. My gross sales have gone down from $100,000 to 80,000 over the past year. Sounds like a lot doesn't it? Well after all the bills I'm nearly broke. That tax will cost me an extra $800 a month. I literally won't be able to survive it. Not with the economy the way it is. So much for the small retail businesses.

Posted by: Capitalist Infidel at July 10, 2009 08:07 AM

That $100,000 and $80,000 are gross sales monthly.

This tax isn't targeted at the "average person." It's targeted to those of us who put our life savings into a small business.

Posted by: Capitalist Infidel at July 10, 2009 08:10 AM

Druid: You are correct. In this case, I meant the state Dept. of Revenue's viewpoint. Their tax collection projections will reflect a "1 cent sales tax increase" as a "22% sales tax revenue increase".

alecthemad - The above is why CY's headline is correct, though your point is also salient as he could have expressed that in his text a bit better.

Jim - My division had to cut 3 FTEs (total FTEs at the time - 21) this year out of something like a total cut of 20 statewide. Our D Gov told us state-trough-feeders he was doing everything he could to 'save jobs' a la TOTO. Then he instituted a hiring freeze. Our state employees age average is north of 55. Since January, when the hiring freeze was put into place, the state has shed over 500 employees thanks to retirements and such. Most of those positions have subsequently been eliminated. As such, there has been close to a 10% reduction in active state employees thus far from the Dec 2008 total. Since a significant majority of state employees here are within 5-10 years of retirement, that total % is going to grow significantly especially with Cap & Tax on the way.

CI - 'I feel your pain' (to quote Slick Willy). In a previous life (before my current occupation) I owned a small carpet cleaning company where I was CEO all the way down to CBW (chief bottle washer). I had no employees but my plans were to grow to at least 4 employees. Those plans and the business all went away with the short economic downturn started in 1998. The business finally died its ignominious death in 2000. As I see it, your only option is to raise your prices which is going to cost you clientel...wash, rinse, repeat and I can see your doors closing :(.

Welcome to TOTO's economy...even for state employees.

Posted by: PhyCon at July 10, 2009 01:55 PM


The sales tax being discussed already does and will continue to split pennies. It is being increased from 4.5 pennies on the dollar to 5.5 pennies on the dollar. You're saying he was /forced/ to increase it by a whole penny, but keep it at a fractional per cent? The tax owed exact to a fraction of a cent (which must be rounded to be paid) will vary with the value of the purchase, and it does so whether the rate is 4.5, 5, or 4.56789123.

The cost to purchase an item did not go up 22%, but the tax most definitely did go up 22$.

Posted by: Saywhat at July 10, 2009 04:33 PM

Woops, that should have been 22%, of course. Though I wouldn't put it past the libs.

Posted by: Saywhat What? at July 10, 2009 04:37 PM

I find it difficult to fathom how a 1 cent sales tax increase is going to have much of an adverse effect on people's buying habits.

Also, a business that raises their prices doesn't necessarily translate into less revenue for that business. Granted, there's a point where it will. It depends on the local economy (if it's a local business), the business itself, competition, client base, etc.

Sure, there will always be people who are going to shop for the lowest possible price. On the other hand, there will always be people who consider more than just the price of a product or service.

Several years ago someone that I know personally raised their prices on their products (hand made, custom built items). Indeed, their gross revenue decreased by a small amount. But, their net revenue increased by a larger percentage! So, for this business, they did less work and their bottom line increased.

Obviously, a price increase will have more of an adverse effect on a business that's highly competitive. It depends on the business. I realize that the above example won't apply for all businesses.

Time will tell if this 1 cent sales tax increase will have much of an effect of the buying habits of folks in NC. I rather doubt that it will.

Posted by: Dude at July 11, 2009 01:50 PM

Dude, did you even read my comment? An extra $800 a month will put me (and hundreds of other small businesses) out of business. Thus the state will make LESS money and unemployment will skyrocket. Are all liberals this intellectually bankrupt?

Posted by: Capitalist Infidel at July 11, 2009 05:12 PM

Capitalist Infidel, Yes, I did read your post, a couple of times actually, wanting to be sure that I understood what you were saying.

If I'm reading your post correctly you're saying that this 1 cent sales tax increase is going to cost YOU an extra $800.00 per month. Forgive me but I don't understand how that can be.

Do you not collect the sales tax from the customers at your business and then pay that tax, which you collected from you customers, to the state? If that's the case I don't understand how the sales increase is going to cost YOU 800 bucks per month. Please explain.

Or, are you anticipating that you will experience an $800 per month decrease in sales directly due to the 1 cent sales tax increase? If that's the case, that doesn't seem like a realistic projection to me.

Granted, I do understand that many restaurants and bars are going through difficult times right now. I know that I, myself, eat out less often than I used to. I don't go to bars. Occasionally, I will go out to a restaurant that also has a bar. Of course, I'm frequenting restaurants less often now because of the state of the economy. I don't have as much money to spare on the luxury of eating out as I did two years ago.

Here in Tennessee the combined state and local use sales tax, depending on what county you're in, is appx. 10%. That means that a $15.00 meal with a beverage at one of my favorite eating joints is going to cost me $16.50. If our sales tax here were raised one more penny on the dollar that meal would cost me 15 cents more, $16.65. I can assure that the extra 15 cents would not be a factor in my decision to eat out or not.

I'm very sorry that you're business is having hard times, truly I am. But, I just don't understand how a 1 cent sales tax increase is going to cost you the extra 800 bucks out of your profits. Please explain to me what I'm missing.

No, all of us so called "liberals" aren't intellectually bankrupt. My guess is that it would be about the same percentage as that of so called "conservatives", perhaps a little lower percentage but not much. As I've said before in other posts, the terms liberal and conservative are pretty much meaningless anyway. That's mostly a diversionary tactic to divide people and take their minds off of the issues that REALLY matter.

But, that's another topic altogether for another time. I do have an excellent example that proves my point. Should you be interested in hearing it, I'll be glad to discuss it with you.

I do hope that you business increases and flourishes. I sincerely mean that.

Best Wishes,


Posted by: Dude at July 11, 2009 05:54 PM

"I do hope that you business increases and flourishes. I sincerely mean that. "

Of course he does. His poor little Kenyan bastard-god is depending on it...

Posted by: Nine-of-Diamonds at July 11, 2009 08:59 PM

Thank you Whine Nine for your usual meaningless contribution to civil discourse. Are you aware that you're a repulsive human being? In fact, you're a disgrace to our species.

Posted by: Dude at July 11, 2009 11:58 PM

lol - definitely a SWPL type, for sure.

I'm an awful human being, but the Magic Negro's little Dr. Mengle merits nothing but proggie apologetics. Got it. I hope to God he DOES think I'm an awful human being - coming from this Negrofascist apologist, what greater compliment is there??

I'm so compassionater than you fascist rethuglikkkans! Waah!"

Posted by: Nine-of-Diamonds at July 12, 2009 12:52 PM


If I'm reading your post correctly you're saying that this 1 cent sales tax increase is going to cost YOU an extra $800.00 per month. Forgive me but I don't understand how that can be.

Forgive me for cherry-picking but you really are ignorant of CI's situation. Allow me to educate you. From my experience auditing bars (or even bar/restaurant combos), the bar portion "backs into the sales tax due". That means if they have the price of a drink/beer/pop/etc set at $2.00 they have to DEDUCT the sales tax amount from the $2.00. They don't look at a customer and say 'the drink is $2.00 and with sales tax that will be $2.11" ($2.11 @ 5.5% sales tax). This is why CI is saying it will cost him money. The only way to recoup that loss is to raise his prices.

Stick with being a doctor, otherwise you would quickly be a bankrupt bar owner.

Posted by: PhyCon at July 13, 2009 12:53 AM

PhyCon: Thanks for the explaination. Here in Tennessee non alcoholic beverages are taxed just like the food in restaurants/bars in which I dine. You get your check, the tax is added to the food and beverage total and you pay the bill. I don't know how it's done with alcoholic beverages. I'll ask around and find out. I'm curious now.

I see your point that CI would need to raise his prices in order to not have to pay the extra 800 bucks per month out of his profits.

I don't know what a beer sells for in a bar these days but for the sake of this discussion let's say 4 bucks. So, if bar owners in NC raise their price of a beer by a nickle, to $4.05, that would cover them, right? In fact, they'd be a penny ahead of the game.

Do you think that will lead to a decrease in business for bar and restaurant owners? I don't see that such a small increase in price would have much effect. Of course, I'm not a bar/restaurant owner.

Thanks again for the explanation. I do wish CI well during these tough economic times. I wish all of us well. We'll get through these times!


Posted by: Dude at July 13, 2009 11:11 PM

You are welcome, Dude. I should have used the word 'elucidate' instead of 'educate' as well. My apologies.

Usually a restaurant does include their 'drinks', whether alcoholic or not, in their check, then subtotal, then apply the sales tax, and then total the bill. That is why I limited my comment to only a bar or the bar portion (when one only enters the bar and orders drinks) of a combination.

A 5 cent price increase would indeed cover his loses. However, since you admitedly do not frequent bars, please understand most bars put their drinks at even dollar, 1/2 dollar, or even 1/4 amounts. They do this for many reasons among which include (but most definitely not limited to); ease of drink order calculations, tip generation, and tax calculations. So the 5 cent increase would suffice to cover their costs but isn't practical.

How CI spedifically handles his business is his province and I may only speak in generalities.

Posted by: PhyCon at July 14, 2009 02:15 PM

Sheesh, my proofreading skills are lacking today:

"How CI specifically handles his business is his province and I may only speak in generalities."

Posted by: PhyCon at July 14, 2009 02:17 PM

[quote]Do you think that will lead to a decrease in business for bar and restaurant owners?[/quote]

For me? Yes it would. Not exactly because of the price.

Have you ever been to a strip club? If not let me explain.

You walk in with four twenty dollar bills. By the time you leave you have (unless you spend all your money on dances) thirty dollars in ones.

Imagine that, but with nickles and dimes.

I will just go to the bar that eats the cost.

Sorry CI.

Posted by: Matt at July 14, 2009 07:24 PM

So, just raising the prices is the answer to liberals eh? Already had to do that last year when they raised the minimum wage. Had to do it again when food vendors raised prices because of fuel increases (which still hasn't gone down) did I mention I also had to do it because of the increase in liquor and beer taxes? Pretty soon only the ultra rich will be able to buy a beer and a shot.

Posted by: Capitalist Infidel at July 15, 2009 08:30 AM