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Get ready to pay a few more pennies every time you shop: North Carolina's sales tax goes up 1 cent on every dollar starting Tuesday.
The tax hike, passed by the N.C. legislature this summer, is expected to raise $803.5 million.
It is supposed to expire in 2011. However, a 2001 sales tax increase characterized as “temporary” is still in effect.
The state is dealing with a massive budget shortfall, and passed $990 million total in new taxes in this year's budget.
The sales tax's impact won't be immediate, but over time the extra 1-cent bite will start to depress people's spending, said Mark Vitner, senior economist with Wells Fargo.
“It's one that will gradually eat away at consumer purchasing power,” Vitner said.
At a time when people's incomes are stagnant or falling, Vitner said increased taxes will make some reconsider luxuries like going out to eat.
“I think psychologically, people will think, ‘Gosh, let's do something a little less next time – maybe we won't get that bottle of wine,'” he said.
A family earning $50,000 will pay roughly $135 more a year. The estimate comes from Benjamin Russo, a UNC Charlotte economics professor.
Individuals making more than $60,000 and couples making more than $100,000 in North Carolina will also pay a new 2 percent to 3 percent income tax surcharge. The surcharge will affect about 13 percent of the state's taxpayers.
