JULY 23, 2009 ISSUE
Proposed Amusement Tax Under Discussion Concerns Those in Travel and Entertainment Businesses
A proposed tax on amusement services is one of many service taxes currently under discussion in Raleigh, but nothing is certain at this time.
“I would hope that by July 31, a new budget would be done, which would include a revenue package…that would include what services, if any, were to be taxed,” said Rep. Cullie Tarleton (D-93).
The state’s two finance committees—one from the House and one from the Senate—met Friday and exchanged their ideas for a new revenue package, but did not reach any agreements, he said.
The fiscal year ended June 30 and the first continuing resolution extended the state budget’s deadline to July 15. Because this deadline was not met, it was further extended to July 31, Tarleton said.
The state’s budget is currently in a $4.6 billion deficit, and the goal for the new budget is to generate $990 million in new revenue, he said.
“For every dollar generated, there will be two to three dollars in cuts,” Tarleton said. “Once the budget is done, there will be deep cuts across every area.”
Those creating the budget are trying to minimize the cuts that will be made to education and health and human services—programs particularly geared toward the needs of children and the elderly.
“Money we spend on education is an investment we make in our future,” he said. “We can’t significantly reduce the investment we make in education.”
Tarleton is not on the finance committee, but he has received a number of emails in opposition to the proposed amusement tax, he said.
“We’ve heard from a lot of the golf courses, day camps [and more],” he said. “Whether their arguments have been persuasive enough [to take the tax off the table], I do not know.”
In regards to the how the proposed amusement tax would affect western North Carolina, Tarleton said “it depends on what taxes might be reduced to accommodate it.”
The broad range of service taxes proposed by the Senate might come along with a reduction in the sales tax and in the state income tax, “with these reductions made up in service taxes,” Tarleton said.
The reductions in sales and income taxes might be possible because the service taxes theoretically would generate more money, with the revenue-generating sources spread over a much broader range.
“None of us like new taxes. First and foremost, I’m a citizen and I don’t like them [either], but I understand that we have to keep the state operating,” Tarleton added.
Harris Prevost, vice president of Grandfather Mountain and president of N.C. Travel Industry Association, said that he and his colleagues understand the situation state legislators are currently dealing with in regards to the state budget.
“We understand the need to raise revenue and overhaul the tax system,” Prevost said. “We are moving toward more of a service society.”
However, the proposed amusement tax, in his opinion, could have negative consequences.
“I think it could be detrimental to the travel industry,” Prevost said. “We’re very price-sensitive, and especially in the economy today, everyone is struggling,” he said. “If we add a tax to the price of admission, we could lose customers.”
Tourism and either green industry or biotech are the only two segments of the state’s industries that are adding jobs, he added.
“You don’t want to hurt an industry that is helping the economy,” Prevost said. “N.C.’s unemployment is one of the highest in the country.”
Cathy Robbins, Tweetsie Railroad’s marketing director, also expressed misgivings in regards to the proposed amusement tax.
“We already pay a three percent tax on our gate admission,” she said. “This would double our taxes.”
Not all businesses currently pay this entertainment tax, and she is concerned about the proposed tax being fair to all similar businesses.
“It needs to be fair, how they write the legislation [and] the guidelines of who pays this tax,” Robbins said. “I think 6 percent is pretty steep. I do think it would affect business.”
She is not sure how legislators determined who would pay the current tax, she added.
In regards to the proposed tax, “I feel sure that there will be an exception for participatory recreation,” Prevost said, adding that the exception would probably include summer camps, whitewater rafting, skiing, canoeing and golf.
Legislators should “make sure there are no unintended consequences that actually reduce revenue,” Prevost said, adding that it is “something to be careful of.”
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