According to NC Budget and Tax Center Director Elaine Mejia, sales tax is the least fairest tax because it hits those with lower incomes harder than those with more income.
*But despite its unpleasantness, swapping property taxes for sales taxes is not all that it is cracked up to be.
First and foremost, the sales tax is the least fair of all major state and local tax sources. While it may be paid in dribs and drabs, those dribs and drabs add up, especially for low-income taxpayers. In fact, relative to income, the sales tax hits the lowest-income taxpayers six times harder than the state’s wealthiest taxpayers. Property taxes are also regressive, but not as much so, asking three times more of the lowest-income taxpayers relative to income compared with the wealthiest taxpayers.
The sales tax is also an increasingly inefficient way to pay for public services in North Carolina. This is because state policymakers have failed to broaden the tax base to include more services. As a result, the percentage of transactions in the state that are taxed falls every year and revenue from the sales tax doesn’t grow with the economy, much less keep up with school construction costs.*
Related, is a set of graphics that show that NC tax revenue has remained relatively flat as a percentage of the overall economy while rates have steadily increased. Their data suggests this is suggestive of an eroding tax base.
