N.C. tax reform package burdens students

Jan. 02, 2014 @ 03:19 PM

To offset income tax decreases, the major tax reform package that the GOP-led legislature passed this past summer includes numerous sales tax changes that were set to go into effect Wednesday. As numerous media outlets have pointed out, the new law puts into place a 6.75 percent tax on various admissions charges, including college and professional sporting events, movies, plays, concerts and museums. The law also adds sales taxes to newspaper sales, electric utilities and various service contracts, while eliminating tax rebates for energy efficient appliances and the annual tax-free weekend for back-to-school shopping.

One change in the law that has been less reported is the elimination of exemptions for meals sold at colleges and universities, meaning that board or meal plans are now subject to state and local sales taxes. Since meal plans are normally part of the total cost of attendance for resident students, the tax amounts to an increase for many in the overall cost of getting a degree. At my own institution, that could translate into a $150 – $200 increase for the next academic year.

In the grand scheme of higher education, a few hundred dollars may not sound like much — and it likely doesn’t to many in the legislature. For many students and their families, however, an extra few hundred dollars is a lot of money, money that they don’t necessarily have on hand. Many of my students and their families find it hard enough just to scrape by each month, let alone finance a college education. Many of my students have to take on a considerable amount of student loan debt to get the degree that, they’ve been told, guarantees them a secure and prosperous future. An added tax to the overall cost of going to school doesn’t provide much relief to those already at a financial disadvantage, especially when that future looks less and less certain.

Nevertheless, the effect that the changes in the tax will have on students and their families doesn’t seem to be of much concern to GOP lawmakers and the McCrory administration. Although supporters of the new law have portrayed them as a necessary updating of the system to reflect economic changes, the sales tax changes essentially offset a swath of income tax cuts, cuts that disproportionately favor the wealthy.

Sure, the income tax cuts mean that most in North Carolina -- not just the wealthy -- will see a bump in take-home pay. The GOP can thus tout its concern to put more money into the pockets of hard-working citizens. But with the elimination of various deductions and exemptions, including deductions for contributions to the NC529 Plan that helps parents save for college, it seems that many will end up paying more, despite the upfront cuts. Indeed, the Budget & Tax Center has estimated that, all things considered, the bottom 80 percent of N.C. taxpayers will be paying more. Add to that the increases in sales taxes, and the tax reform package looks more like an across-the-board tax increase for the majority of taxpayers.

That includes many students. Despite the rhetoric we often hear about the importance of making college affordable, the new tax on meals sold at institutions of higher learning intentionally increases the cost of getting a degree. This comes at a time when the direct and indirect costs of attending college continue to increase on a yearly basis, with no real relief in site. Students at our colleges and universities are, in effect, being forced to foot the bill for tax cuts that primarily favor a small percentage of the state’s population—and many will have to go into more debt to do so.

Unfortunately, it’s what we’ve come to expect from the legislature and the McCrory administration. Our students, however, deserve better.

Hollis Phelps is an assistant professor of religion at Mount Olive College, Mount Olive. This column was distributed by N. C. Policy Watch.