Repeal the labor sales tax hike

| April 21, 2017

Editorial by Winston-Salem Journal, April 17, 2017.

A recently-filed bipartisan state bill to eliminate labor sales tax is a solid start toward correcting a legislative misstep. There’s no reason it shouldn’t pass.

House Bill 726 targets what is termed as the contract between a client and contractor, the Journal’s Richard Craver reported Wednesday. It eliminates labor taxes on a variety of services used largely by working people, including auto repairs, reupholstering furniture, patching tires, mending clothes, troubleshooting computer software, repairing cellphones and jewelry, tinting vehicle windows and tuning up automobiles, lawnmowers and chain saws, The Associated Press reported.

A lot of focus is being placed on the auto repair labor tax, which concisely exemplifies how the labor sales tax affects low- to middle-income households that are more likely to nurse aged vehicles as long as they can rather than pay for more extensive repairs or new cars.

The U.S. Bureau of Labor Statistics found in 2015 that the average annual maintenance and repair cost was $437 for a vehicle one to five years old, $588 for a vehicle six to 10 years old, and $576 for a vehicle 11 to 15 years old, the Journal reported.

In 2015, the average cost in N.C. for handling a “check engine light” situation was $395.14, of which $149.14 was labor. Since March 2016, that service includes an additional $10.06 in labor sales tax, the Journal reported.

The tax not only keeps low- and middle-income households from seeking repairs, it cuts into the profits of car repairmen. This is true of the other categories of labor, too.

Repealing the labor tax would be beneficial to working families.

The sales-tax expansion was approved by the Republican-controlled legislature in 2015 and went into effect in March 2016. Legislative leaders expected the expanded sales tax to help make up for $400 million in revenue lost from phased-in cuts to the corporate and personal income tax.

In other words, those upper-class tax cuts had to be paid for somehow.

Before the services sales tax went into effect, businesses generally charged tax on parts, but not on labor, the Journal reported.

We understand that those with higher incomes would like to keep what they’ve earned. But so would low- and middle-class workers. And they’re less able to handle an increase in labor costs. Let’s giving working people a break.

So far, sponsors include three Republican and two Democratic legislators. We hope others will join them. The legislature should also consider repealing other taxes that concentrate on low- and middle-income families, like the 2014 entertainment tax that raises prices for plays, movies, live music and other forms of entertainment.

In 2011 when Republicans gained power in the legislature, they were determined to reform taxes in a way that would create jobs and generate a stronger economy. The results haven’t all been negative, but making life more difficult for the majority of residents isn’t a wise path to a prosperous state.

Category: NC SPIN Perspectives - Opinions from NC Leaders & Organizations

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  1. Richard L Bunce says:

    Hypocrites at WSJ, repeal the sales tax on labor… increase the income tax on labor. Tax what you don’t want, don’t tax what you do want… unfortunately for the WSJ and other like minded pundits, the tradeoff is between government revenue and votes, and following principles be damned.