Today in North Carolina

Tax changes could surprise

December 28, 2013 

— Early next year, North Carolinians will learn the cost of some related, key components of the tax overhaul approved by state lawmakers.

In this case, the issue is pretty much out of the hands of legislators. It’s the state Utilities Commission that will decide what happens.

While legislative supporters of the tax overhaul sold it as a means of reducing state taxes overall, it is possible the legislation could have the effect of increasing residents’ power bills.

The tax legislation included a provision that will raise the sales tax people pay on electricity and natural gas from 3 percent to 7 percent. For someone with a power bill that averages $100 a month, the difference would mean paying $48 more a year.

Tax-code writers expect the change to result in a collective increase of $519 million in utility sales taxes paid by consumers.

On the other hand, the utility companies that provide that electricity and natural gas will get a tax break.

The tax law repeals a gross receipts/franchise tax and instead subjects the utilities to a general franchise tax. That change is expected to save the companies around $400 million.

The companies will also benefit from a general decrease in the corporate income tax, although how much of the savings accrue to the utilities isn’t known.

If that sounds unfair, it might not be.

Utilities are regulated monopolies, and the state sets the rates that they can charge based on their cost of doing business.

Obviously, a tax cut decreases their cost of doing business.

Now the arguing has begun over just how much in savings the tax cuts will mean for the companies and what other factors should or should not enter into the rate-setting calculation.

It’s the state Utilities Commission that is charged with setting the rates, and a provision included in the tax legislation instructed it to examine the tax changes as it considers them.

Sometime in January or February, the commission will likely issue a decision about how to handle the tax changes as they relate to rates.

Company filings with the commission show no great consensus among the utilities about which tax changes to consider. Attorney General Roy Cooper, meanwhile, has weighed in, filing comments with the commission saying it should lower rates.

How the issue is resolved will certainly affect what the tax overhaul means for the average North Carolinian.

Consider that for someone with $40,000 in taxable income in the state, the legislature’s decision to lower the personal income tax will mean savings of about $350 a year.

If those savings are mostly nickeled and dimed away by higher sales taxes on electricity, applying the sales tax to a trip to the movie theater and doing away with sales-tax holidays, the idea that this tax overhaul benefits everyone gets nickeled and dimed away too.

And when you only earn $40,000, nickels and dimes can mean a lot.

Scott Mooneyham is a syndicated columnist who writes about state government and politics.

The Clayton News Star is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service