Local Politics

Perdue calls for temporary penny sales tax increase

Posted July 7, 2009 3:36 p.m. EDT
Updated July 7, 2009 7:38 p.m. EDT

— Trying to break a legislative stalemate on state budget negotiations, Gov. Beverly Perdue on Tuesday called top lawmakers to the Executive Mansion to lay out her own plan for raising extra revenue in the coming year to erase a projected $4.6 billion deficit.

Perdue called for raising the state sales tax by a penny for 13 months, beginning Sept. 1. The increase would raise more than half of the $1.6 billion in revenue she would like to include in the 2009-10 fiscal budget.

She also would enact taxes on a range of services like appliance installations and repairs, movie tickets, courier services and cosmetic surgery and would raise taxes on cigarettes by 50 cents per pack and on alcohol.

Her plan also calls for lowering personal and corporate income tax rates and providing tax relief to home buyers and small-business owners.

"We must make deep cuts, even to many good programs in our state, but we must also raise additional revenue," Perdue wrote in a letter to lawmakers. "I do not believe that the revenue packages presented by either the House or the Senate are sufficient to meet our goal of protecting North Carolina’s classrooms and vital services."

House budget negotiators offered a quarter-cent sales tax increase and higher income taxes on individuals making more than $200,000 a year, while the Senate leadership is backing an array of taxes on services, from auto repair to lawn mowing to manicures.

Lawmakers have made little progress on reaching a budget compromise in two weeks of negotiations. They passed a continuing resolution last week to keep state government running through July 15 in hopes of passing a budget by then.

"The continuing resolution has only eight days remaining. I urge all of you to work together toward a rapid resolution," Perdue told lawmakers, adding that her budget team already is reviewing spending and programs to offer suggestions for future changes.

Budget negotiators quickly shot down the governor's plan, saying they have been trying for weeks to agree to a package that would raise $1 billion in new revenue, not the $1.6 billion she proposed.

"We're having problems getting that much through. Many of the things she calls for in the package just aren't realistic," said Rep. Mickey Michaux, D-Durham.

"She knows from giving us that list and from giving it to the press that there will be a lot of things that are unacceptable," said Sen. David Hoyle, D-Gaston.

Lawmakers said they fear a temporary sales tax could last beyond Sept. 30, 2010, if the economy doesn't pick up as expected.

When asked how she could guarantee that the penny increase would be rolled back after 13 months, she said simply "because I'm the governor."