Taxes vs. fees

Date posted: August 4, 2011

In North Carolina’s latest state budget, there were some tax reductions but also some fee increases. As N.C. State University economist Mike Walden explains, taxes and fees aren’t the same, but, bottom line,  they both mean the government is getting money from the people it serves.

“It does mean this money’s going to the government. But there’s a conceptual difference between (taxes and fees). Taxes are paid by people to support general functions of government that presumably everyone benefits from — the so-called public-good argument. So, for example, we pay income taxes and sales taxes in part to support our schools, support our universities, support our public safety folks, the courts, the correction facilities. And the idea is everyone really benefits from (these), even people who don’t go to school or universities are benefitting from a better-educated work force, which attracts higher-paying jobs.

“Fees are paid for government services that primarily benefit only that one person. So, for example, someone pays a fee to fish or a boating fee, or you pay a fee to a municipal garage. The notion there is that you’re specifically — and only you are — benefitting from those activities. No one else is. And so there is this fundamental difference between fees and taxes. And … what we saw in the session that just ended in the General Assembly some taxes were lowered, but we actually had some increase in fees.”

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