RALEIGH — North Carolina taxpayers have a good reason to worry about Gov. Beverly Perdue’s plan to raise taxes by more than $1.6 billion a year. That’s the assessment of the John Locke Foundation’s chief budget analyst.
“In the largest tax hike proposal put forward so far this year, the governor is returning to the tried-and-true method of promising temporary, or ’emergency,’ increases in sales and income taxes,” said Joseph Coletti, JLF Fiscal Policy Analyst. “We’ve seen in the past that these temporary increases have a way of sticking around a lot longer than originally promised.”
Perdue released details of her new tax plan today. It would increase taxes by $1.6 billion for the budget year that started July 1. The tax increase would total almost $1.74 billion for 2010-11.
About half of Perdue’s proposed tax hike involves an “emergency” 1 percent increase in the sales tax rate. Adding the sales tax to services such as warranties, installations, and repairs; recreation and entertainment; courier services; amusements and movies; and digital click-throughs would boost the total sales tax increase to nearly $1.2 billion. A rate reduction is promised in October 2010.
“No one should expect that this so-called emergency increase would go away when promised,” Coletti said. “The problems we face now are tied to the fact that the government has a spending problem. These taxes feed the government’s addiction to spending. You don’t fight an addiction by feeding it.”
Perdue also wants a 50-cent increase in the cigarette tax and more than $46 million in alcohol taxes. She also wants to raise more taxes from business, with a promise to reduce the corporate income tax in January 2011. Perdue would raise the state’s personal income tax rate with another “emergency” surcharge on individuals earning $500,000 and married couples earning $1 million.
“Supporters will say they’re making the rich pay their ‘fair share,’ but what this type of income tax really does is take away the capital that entrepreneurs and small business owners need to make investments that help the economy grow,” Coletti said. “With a state unemployment rate higher than 11 percent, the last thing we need to do now is chase away the people who are likely to create new jobs.”
Even Perdue’s plan for “targeted tax relief” includes objectionable items. “While she would make North Carolina taxpayers shell out more money in sales taxes, income taxes, and business taxes, the governor would give away more money for items like the state film credit,” Coletti said. “All in all, this is a bad deal for North Carolinians. State budget negotiators should look elsewhere — including the John Locke Foundation’s Can-Do Budget — for better ideas that address the state’s budget problems without taking more money out of North Carolinians’ hands.”