Remember back to October 2008 when then-candidate Bev Perdue declared “I don’t believe you can raise taxes in an economy with folks struggling the way they are”? Of course, we all now know she changed that “belief” in her first year in office. Perdue signed on to “temporary” tax hikes estimated to cost taxpayers a total of almost $2.3 billion over two years.
Now she is suggesting that she will recommend extending those taxes when she releases her budget plan in February.
Many of you will recall North Carolina’s recent history with taxes promised to be “temporary.” As part of the FY 2001-02 budget, the General Assembly and then-Governor Easley included a 1/2 cent increase in the statewide sales tax rate, a 1/2 cent local sales tax hike, along with the creation of a new top marginal income tax rate of 8.25%. The state-level tax increases were scheduled to expire on July 1, 2003 and Dec. 31, 2003 respectively.
Come 2003, lawmakers decided to renege on their promises and extended both taxes another two years. Again in 2005, in spite of rapidly rising revenue, lawmakers once again decided to extend the “temporary” taxes for yet another two years. Finally in Dec. 2006 state lawmakers allowed the statewide sales tax rate to fall by 1/4 cent, and the top marginal income tax rate was allowed to expire at the end of 2007.
The other 1/4 cent statewide sales tax, along with the 1/2 cent local sales tax hike, became permanent. So much for promises of “temporary” taxes.
Making matters worse, data shows that lawmakers extended the temporary taxes at a time when the state was rapidly escalating spending and reaping billions in surplus revenue. By extending the “temporary” taxes beyond the original sunset date, taxpayers were forced to cough up an additional $2.03 billion from FY 20003-04 to FY 2007-08. Meanwhile, the state collected $3.1 billion in surplus revenue, monies that weren’t saved but rather plowed back into the state budget; causing it to swell by 39% during those years. Almost none of that surplus revenue was set aside in a “rainy day” fund – and we all know how rainy it is in Raleigh these days.
In short, if we look at recent history we can see how difficult it is for North Carolina politicians to loosen their grasp on revenue sources, even if it means breaking promises.