To Tax Or Not To Tax?

May 19, 2011

Gov. Bev Perdue

  Governor Bev Perdue is finishing up a whirlwind tour of the state this week, touting the importance of public education. She is on the road as the state legislature considers cutting the education budget by nearly $1 billion.

At the center of the debate is a temporary one-cent sales tax. Enacted in 2009, it is set to end in June. Republicans want to let it lapse, the Governor and education advocates want it continued.

Perdue spoke today to business leaders in Raleigh, and tried to make her case to a group not usually supportive of such taxes. 

The Governor made her way past the chess set with the three-foot high pieces and the mock-fire engine to a conference room at the Marbles Kids Museum. Waiting for her there were members of the Greater Raleigh Chamber of Commerce.

And while she didn’t mention continuing the sales tax specifically, she clearly had the nearby general assembly on her mind.

Governor Bev Perdue: "I tell you what my friends, as you focus on innovation, also focus on courage, and focus it on the outcome of what’s going on just down the street from here. We are in a crisis in North Carolina. We are in a race to the bottom. We’re about to witness the biggest layoff of public education employees in the history of North Carolina. Is that worth standing up for?"

At the beginning of the legislative session, Perdue agreed with the new Republican majority. The temporary one-cent sales tax should be allowed to expire, as would the $1 billion it could generate. But now the budget debate has grown more fierce, and the reality of about $1 billion in cuts to education are more real.

Now, Perdue wants three-quarters of the one cent tax to continue. If applied to education, that could save many of the 18,000 education jobs now on the chopping block.

Perdue is not alone in changing her mind. In an April poll conducted by Elon University, 73 percent of respondents supported extending the tax for one year. That’s an increase over previous polls.

One group not wavering is the state Republican leadership. Their stance is the same as it was when Republican Senate Leader Phil Berger gave his reply to Perdue’s State of the State address in February.

Sen. Phil Berger: "Governor Perdue promised the tax hikes passed 2 years ago would be temporary. We will keep her promise, because the best economic stimulus we can provide is letting people and businesses keep more of their own money. Reducing taxes will help us compete with surrounding states for much needed new jobs."

Not all business owners agree.

Brenda Berg calls herself a former Republican and current independent. She is the founder and CEO of Scandinavian Child, a Raleigh-based company that makes and sells strollers, baby bottles, and toys. She says she has written her legislators on the issue.

Brenda Berg: "I’m mystified why we would take a one cent tax and compromise our education system. A one cent tax reflects, for the average citizen, 24 cents per day. For me, the customers are not buying or not buying product based on that one cent. But we are having children perform or not perform, we have teachers being fired or not fired, based on that one cent tax. I think the difference is clear."

Berg’s business is small, and as the mother of two school-aged children in Wake County, her support for public education might be expected. But some of those who run larger businesses feel the same.

Richard Urquhart is the Chief Financial Officer of the Golden Corral restaurant chain.

Richard Urquhart: "The governor has a tough problem, with the politics of that. Many people ran on the basis that they’d repeal that tax. I personally support the tax and think we should keep the funds and we should spend it on education."

Many who keep track of the state legislature assumed extending the one-cent tax was dead when the general assembly began the long process of negotiating a budget. But with the governor, key business leaders, and the public showing renewed interest, it could make its way back onto the table.