From movie tickets to cable TV bills, lawmakers seek higher taxes

07/18/2005
Associated Press
By Steve Hartsoe

CARY, N.C. -- Christopher Hayworth doesn't mind paying taxes, but the 22-year-old retail clerk takes issue with boosting the levy on some of the fun things in life: movie tickets, candy and satellite TV.

"It just seems like they're invading the whole entertainment" area, said Hayworth as he drank a large soda in the lobby of Crossroads 20 movie theater here. "It won't affect me, but it feels like an insult."

State lawmakers are considering a host of higher taxes and fees as they craft a new budget for 2005-06 and look for more than $200 million in additional permanent revenue sources to run state government and build roads. There's widespread agreement on most of the new tax items and new fees, the majority of which would take effect later this year.

Both the House and Senate also have agreed on increasing several fees, including raising the cost of a driver's license renewal by 95 cents to $4 a year, and the fee for automobile title and registration - last increased in 1983 - from $20 to $28.

Some of the tax increases are proposed as part of a nationwide effort in more than 40 states to reset widely varying tax rates of various goods and services to their statewide sales tax rate, or set them at zero. The idea is to eventually start collecting sales taxes on purchases made online.

Supporters believe collecting sales taxes on items bought on the Internet would generate hundreds of millions of dollars for North Carolina, eventually resulting in a lower overall sales tax rate.

"Our goal is to be able to lower the 7 percent rate as we widen the base of collections to include all of these Internet sales that are evading taxation," said Rep. Paul Luebke, D-Durham, a co-chairman of the House Finance Committee.

But John Hood, president of the conservative-leaning John Locke Foundation, called that idea "fanciful." The growth of online and catalog sales will erode sales tax revenue from brick-and-mortar retail sales, leaving governments without the expected windfall.

"They're using the streamline sales tax issue as an excuse to raise taxes on consumers," Hood said.

Among the taxes affected by the multistate effort are the levies on telecommunications services, satellite television and liquor, which would rise to 7 percent, generating an additional $61.7 million this fiscal year. The debate on that increase remains ongoing as cable companies seek to deduct the franchise fee they pay to local governments - which can reach 5 percent - from the 7 percent state tax rate. Satellite TV customers now pay a 5 percent state tax.

Gov. Mike Easley proposed the other tax changes, including bringing the levy on movie tickets and candy to 7 percent, to both unify the tax code in North Carolina and to make taxes placed on competing industries - such as cable and satellite TV - more fair, officials said. Candy has been a tax-free treat for decades; the new levy would generate $11 million this fiscal year.

"There's certainly no reason, if soft drinks are taxed at 7 percent, why candy should not be taxed at all," Luebke said.

Some of the strongest opposition to the tax adjustments has come from the movie theater industry. Its members say they have collected nearly 12,000 signatures from moviegoers who oppose a rise in the existing 1 percent levy on tickets.

The increase would add about 40 cents to the price of many movie tickets, they argue. Along with an identical increase for live entertainment, the two taxes would generate $18 million for the state this fiscal year.

Theater officials say layoffs could happen, though some observers doubt that.

"This would hurt working families and businesses," said Marie McClaflin with Charlotte-based Consolidated Theatres, which operates the Crossroads 20 theater.

Though measured in pennies, the increase could mean James Penry will attend fewer movies - he averages 10 a year - and rent more DVDs, he said.

"I thought movie prices were too high already," said Penry, a 42-year-old network engineer from Cary.

Dan Gerlach, an Easley budget adviser, said the goal of the movie tax is to equalize the playing field: If renting a movie at Blockbuster gets taxed at 7 percent, so should a movie ticket.

"All these things are taxed at different rates," he said. "You tax all the competitors the same."

Movie-goer Hayworth, of Fuquay-Varina, would prefer to chuck all the sales taxes and replace them with the income tax.

"It just seems nit-picky," he said.

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