RALEIGH (AP) ó Gov. Beverly Perdue’s budget proposal released Tuesday seeks a dollar-per-pack increase in North Carolina’s cigarette tax and higher alcohol taxes to help narrow the state’s $3.4 billion budget gap for the coming year.
Perdue’s proposal would increase the cigarette tax from 35 cents per pack to $1.35 and seek a 5 percent tax surcharge on alcohol, according to a copy of Perdue’s two-year budget proposal reviewed Tuesday by The Associated Press before the governor’s formal announcement.
The nearly $21 billion budget for the year starting July 1 would raise $508 million from the two proposed tax increases, the budget document said. Perdue also wants to raise a licensing fee on “professionals” from $50 to $200 to raise another $27 million.
The extra money attempts to deal with the state’s worst fiscal conditions in a generation. The Legislature will review the plan as it approves its own budget by this summer and sends it to Perdue’s desk for her signature.
The higher cigarette tax, if approved, would make North Carolina’s rate the 20th highest in the country, compared to the current 45th, according to Perdue’s budget. The cigarette tax was just 5 cents a pack until the Legislature agreed in 2005 to raise it over two years.
It also would further crumble what otherwise has been North Carolina’s special relationship with the tobacco industry.
Legislative Republicans criticized the proposal, saying there are many other ways to deal with the budget gap besides raising taxes, pointing to recommendations they have made to cut inefficient programs and intercept other funds.
“The reason we have a revenue problem is that people don’t have money,” said House Minority Leader Paul Stam, R-Wake. “This is the worst year to raise tax rates.”
North Carolina remains the country’s leading flue-cured tobacco state and its revenues and jobs helped build the state for much of the 20th century. But reduced demand for the leaf and changing views on smoking and health have led the Legislature to pass more smoking restrictions.
The budget proposal also calls for exempting the first $25,000 of net income from state tax for businesses with profits of less than $100,000, with the amount dropping to the first $15,000 for business making between $100,000 and $200,000.
Perdue also would seek a “caregiver tax credit” to benefit people who take care of aging citizens, along with the creation of a sales tax holiday for people who purchase equipment that helps conserve water, according to the budget document.
Perdue said Monday her budget would attempt to protect education and help create and retain jobs.
The new governor, who wrote several state spending plans while a Senate budget-writer in the 1990s, said she would raise overall spending for state education by $350 million over the next two years, led by a 2.5 percent increase for the K-12 schools. Federal stimulus money will help with the increase.
The budget document said she would use $1.7 billion in federal stimulus money to help narrow next year’s budget gap and $1.2 billion to close the gap for the year beginning July 1, 2010.