LAURINBURG — Scotland County representatives say a provision in the sweeping reform of North Carolina’s tax code that will take effect Jan. 1 will hit the pockets of middle to lower class families the hardest — and unfairly affect nonprofits and arts councils, who are no longer exempt from charging taxes on admission prices to events that serve as fundraisers.
“When you think about it, the taxes are on the people, it’s the consumer that gets hit a little bit harder,” said Rep. Ken Goodman, who not only voted against the Tax Simplification and Reduction Act but spoke out against it in front of the state General Assembly. “… I think tax reform is a good idea but I don’t think this is what we got. If they wanted to go back and really sit down and try to broaden the tax base and lower tax rates for everybody and produce true tax reform, I would love to be a part of that process.”
The act, approved by Gov. Pat McCrory in July, lowers corporate and personal income taxes and expands sales tax to include admission tickets to movie theaters, concerts, plays and college and professional sporting events. Rep. Garland Pierce, who also voted against the bill, joined Democrats in calling it “unfair,” saying that those with shallow pockets would be the hardest hit by having to pay more for entertainment at a box office or ticket booth — and that the replacement of the graduated income tax rate with a flat tax will benefit the state’s richest while not bringing in enough money to sustain government services.
“They wanted to lower that top rate so they had to find a way to make the money somewhere,” Goodman said. “Actually, I don’t believe their numbers are going to work out. I think when the revenue comes in they’re going to have a shortfall and they’re not going to do as well as they think.”
According to House Bill 998, passed as part of the tax reform, non profits that offer a live performance or any live event; show a film or motion picture; operate a museum, a cultural site, a garden, an exhibit or similar attraction, or offer a guided tour at any of these attractions, are mandated to charge a 4.75 percent state tax and a local tax. Events ssponsored by schools or youth athletic contests sponsored by a nonprofit are exempt.
State organizations are not affected by the change, something Goodman says has been “frustrating,” and may change if enough heat is put on legislators.
Most nonprofits contacted by the Laurinburg Exchange Tuesday were not aware of the mandate in the new tax code and did not want to comment until researching further. But Jennifer McRae, director of the Storytelling & Arts Center of the Southeast, has been following the bill very closely; the center was part of a state-wide push by the Arts North Carolina to lobby against the tax, sending letters and making phone calls to legislatures.
Still, McRae doesn’t quite know how the center will address the change.
“We’re trying to figure out the cost and what we base it on,” she said. “Do we include it in the ticket price or charge it as sales tax? … It doesn’t go into effect for a few months so we have a few months to figure out what we’re going to do.”
McRae said for most events, the reform will add about 50 cents to tickets, an additional fee which shouldn’t turn a prospective eventgoer away — as long as the center decides to pass that fee on to the consumer.
“It’s not that much, but when we take in as little as we do, every dollar and every dime counts. Whether it’s concessions or ticket sales, it really all goes to help the arts in Scotland County. … Every little bit helps us, and every little bit hurts.”
The administrative tasks associated with the tax will also put more strain on a small staff that is already stretched thin.
“We’re already a small group of part-time folks as it is,” she said. “We basically have three part-time employees and a lot of volunteers who help us out. It’s going to mean more work, it’s going to be more paperwork.”
County events such as the Scotland Memorial Foundation’s annual fundraiser “Putting on the Ritz,” tours at the John Blue House and the county’s museum, and a “Casino Night” hosted by the Red Cross could also be affected, although Bill 998 offers a twice-yearly tax exemption for nonprofits who offer festivals — meaning the John Blue Cotton Festival may not be affected. However, the Laurinburg Cinema, the only movie theater in Scotland County, will be.
Tonia Stephenson, president of the Scotland County Chamber of Commerce, said she didn’t know to what extent the mandate would affect her organization, as it is classified a business nonprofit and donations are considered for tax purposes to be business expenses, not charitable donations. But, she was optimistic that the tax would not phase Scotland consumers for long.
“My hopes would be that the new tax would not deter people from using these services, however new taxes tend to scare folks at the start,” she said. “In the long run, they will get used to paying these taxes just like they do on everything else that they purchase.”
Goodman said there were certain parts of the bill he could get behind, like the reduction of corporate tax that will make North Carolina more competitive with surrounding states. But Greg Icard, Scotland County’s economic director, said while it may help, tax rates are not a big issue for most corporations.
“Some companies it will be a great advantage to them, and some companies it won’t impact that much,” he said, adding that large, multi-state corporations often have ways of moving money around to where it is most advantageous for them. “… For most industries, it’s a consideration, but when you’re in the running and a few other places are up against you, county incentives are what really make the difference.”
Still, Icard said that he welcomed anything that would make his job easier.
“Anything that we can do to make a rural economy more attractive, I’m all for it,” he said. “I’ll let other people debate the best way to do that.”
As far as Goodman is concerned, the legislative debate was one that was cut much too short.
“I just didn’t think it was well thought out,” Goodman said. “I felt like the leadership had promised tax reform but at the end of the day, they didn’t have one, so they threw this together and rammed it through the General Assembly and in the end we got a poorly constructed bill.”