Perdue’s speech leaves progressives wondering where she stands on cuts
Gov. Beverly Perdue spoke Monday about the State of the State, but her speech left progressives concerned about the state of the governor’s willingness to defend state programs even if it requires raising taxes.
Perdue appeared to split the difference between progressive and conservative camps by promising to preserve the jobs of teachers and teacher’s aides while also proposing to cut state spending and reduce the state’s corporate tax rate from the highest to the lowest in the Southeast.
Beyond those broad measures, she offered few details in what spending she would cut or whether she is open to extending or raising state taxes.
“We are concerned that the Governor did not mention other vital public investments such as access to health care, public safety, and infrastructure,” Together NC said in a statement.
The group urged the Perdue to use her budget proposal this week to defend essential state programs.
“Our Governor has choices. She can choose to stand up, to preserve vital public investments such as public schools, community colleges, and public safety … Or, she can choose to take the short-term route of illusory quick fixes,” the group said.
Meanwhile, the Budget and Tax Center, a project of the NC Justice Center, renewed its call for Perdue to seek more revenue rather than relying on cuts alone to clear a budget deficit now estimated at $2.4 billion.
“Most troubling is that Governor Perdue has failed to address the driver of our budget challenge — the collapse in revenues brought on by a weak economy and an outdated revenue system. Instead, Governor Perdue focused on misguided corporate tax cuts that will do little to create jobs or put the state on a path toward long-term prosperity,” the Budget and Tax Center said in a statement.
Republicans applauded Perdue’s call for a cut in the corporate tax rate and repeated their pledge not to raise taxes or extend a temporary 1-cent sales tax increase that is about to expire.
Senate President Pro Tem Phil Berger (R-Rockingham) said in response to Perdue’s speech: “Gov. Perdue promised the tax hikes passed two 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.”
The governor’s proposed cut in the corporate tax could cost the state an estimated $400 million or more.
“Right now, we have the highest corporate tax rate in the Southeast. That means our businesses are paying more taxes when they could be creating jobs,” Perdue said. “That’s a strike against us from Day One as we work to convince businesses that North Carolina is the best value.”
The NC Budget and Tax Center said the tax cut may do more damage than good. It said the cut will produce few jobs and will have little influence on whether businesses come to North Carolina or chose to stay. Corporate locations are more influenced by quality of life elements which could be diminished by deep cuts in spending, the group said.
Meanwhile, John Quinterno, a principal with South by North Strategies, a Chapel Hill research firm that analyzes the state’s economy, questioned the impact of the corporate tax cut. He said the tax generally only applies to large companies and most of them already pay a lower tax rate due to existing tax breaks.
Of the 6.9 percent corporate income tax rate the governor proposes cutting to 4.9 percent, Quinterno said, “While it sounds good, relatively few corporations actually pay it.”
Perdue will face further pressure from progressives once she rolls out her budget and gives the details of her proposed cuts in programs and services. But Quinterno said she and the Republican-led General Assembly have left themselves few options given the state’s economic and budget circumstances and their unwillingness to raise taxes or revise the state tax code.
“They are facing a very difficult situation and in some ways they are trying to square a circle,” he said. “They are trying to protect fundamental services, but at the same time trying to do that with a revenue stream and a revenue system that is not able to generate the investments that people say they want. Add to that the whole balanced budget requirement the state has and no one faces very good choices.”