North Carolina Should Repeal The Fridge Tax

Max Velthoven State Affairs Associate, ATR
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North Carolina lawmakers have returned to Raleigh for the 2014 legislative session with a number of items on its to-do list, including a series of tax changes. One provision in the tax code that is not currently being discussed, but should be, is what is known as the state’s white goods tax, a tax levied on the purchase of household items such as refrigerators, dishwashers, and other appliances.

Tar Heel State legislators passed a law in 1993 making it illegal to dump white goods in landfills and imposed a white goods tax. In North Carolina, buyers of white goods pay a tax of $3.00 per item. For the comprehensive list of goods this tax is applicable to, click here. It includes freezers, dryers, water heaters and air conditioners. This tax is levied on top of all other applicable taxes, such as state and local sales taxes.

North Carolina counties must provide at least one site for the collection of discarded white goods and the removal of Chlorofluorocarbons (CFC’s). Cracking down on the use of CFC’s – an organic compound that was once widely used in fridges and other “white goods” that damages the ozone layer – is the stated goal and purpose of North Carolina’s White Goods Tax. In 1987, all United Nations members signed the Montreal protocol. Member states agreed to ban the use of CFCs in the following decades.

Simply put, North Carolina’s White Goods Tax is a tax that has outlived its original intent, and should be repealed. Today, refrigerators and the other aforementioned household appliances do not contain CFC’s. New fridges will be more environmentally friendly than those that they replace, since modern fridges are energy efficient and made of better recyclable materials.

Not only is the White Goods Tax an outdated levy that seeks to combat a problem that no longer exists, it has also brought added bureaucracy and high collection costs. In FY 2011, the white goods tax brought in 4.2 million in collections and cost $300,000 in government administrative expenses. That is $7.14 in collection costs for every $100 dollars collected. Note: the Internal Revenue Service has collection costs of $0.50 per $100 revenue, meaning the white goods tax costs almost 15 times as much to collect as the income tax. It’s never good to be 15 times less efficient than the IRS.

The white goods tax might not sound high, but $3 is a significant surcharge when considering that it has to be paid on several essential household appliances. An additional tax on top of state and local sales taxes is nothing to sneeze at, especially for families struggling to make ends meet in a sluggish economy that just saw quarterly GDP shrink for the first time since the great recession.

While the docket for this year’s short session in the North Carolina legislature is already quite full, Republicans who run the North Carolina House and Senate have made clear that they intend to pass further tax relief in the coming years. The focus for those efforts will be on providing income tax relief, but North Carolina lawmakers should also put getting rid of the outmoded white goods tax near the top of their to-do list.