Taxes and the New State Budget

The new North Carolina state budget has officially passed through the state House and Senate, and has been signed by Governor Pat McCrory. It includes significant changes to the state’s sales and income taxes over the next two years. This will affect every taxpayer but some will see more of an effect than others.
College students tend to make little to no money, so on the whole they will see a much smaller decrease in income taxes. This is because if more than $750 dollars is spent per year on repair, installation, or maintenance services, a large sales tax increase will cancel out any net benefit from the income tax cuts. So overall lower earners like college students will see no change to their current net tax due. However, high income earners could benefit as long as they don’t spend more than $7,000 on taxable services. This is a significantly higher threshold for an income earner of about $100,000, who likely will spend far less than this per year.
The language is broad when it comes to what these services entail but essentially it’s any taxable one of these services: The most likely service to affect college students is car repair, as most college students own a car, and usually older models. These cars tend to have higher cost repairs, and need more repairs in the long run. This will affect those with higher incomes to a lesser degree as they tend of newer models, require less maintenance and have a higher threshold before they break even with their taxes.
The sales tax will increase in 2016 on these taxable services, while the income tax cut won’t start until 2017. This means that for this year both high and low income earners will see increases in the amount of tax they pay until the income tax cut kicks in. There will be other small changes such as increase in DMV fees as well as decreases in taxes for seniors and those with issues that lead to high medical bills. The biggest other fee to affect college students is a small increase in community college tuition per credit hour which will take effect in the spring.
The information in this article is compiled from the State Budget and from the News & Observer.

Leave a comment