RALEIGH — Taxpayers in North Carolina have had a rough time of it during the past three years. State income, retail sales, and other consumer taxes have risen by hundreds of millions of dollars a year. Many city and county governments have imposed tax increases of their own.

Now, in 2004, the state budget situation is somewhat different. With a small surplus of 2003-04 revenue collections over projections and some unspent funds in the treasury, Gov. Mike Easley and the General Assembly need not and will not jack up tax rates in this election year (though it should be clearly understood that their new budget plan is a tax-increase budget — the tax increase will simply come in 2005, after the election, to pay for their unfunded $1 billion spending increase.

With North Carolina’s city and town governments not scheduled for elections in 2004, the political dynamic is different. As the local-budgeting cycle starts, it’s becoming evident that there will be substantial pressure to raise municipal tax rates this year, sometimes by a large amount. There are already proposals from staff, in some cases supported by elected officials, to impose higher taxes in such cities as Durham, Raleigh, Winston-Salem, Asheboro, High Point, Charlotte, Lenoir, and Greenville. But the proposed tax increases are by no means confined to municipalities. Despite the impending elections, there appears to be serious discussion underway about raising taxes on the part of county commissions in Mecklenburg, Durham, Union, Lincoln, Orange, and elsewhere.

Every local situation is different, naturally, but there are some common themes worth pondering:

* Exported state deficits. Some cities and counties are still suffering the effects of having their tax sharing and reimbursements dollars snatched by Easley and legislators to help balance the state budget.

* Recessionary revenue weakness. Many localities have seen slow revenue growth by historically standards, and some have actually seen revenue declines — much of it due to businesses either going bankrupt or taking advantage of accelerated depreciation offered in federal tax packages.

* The Medicaid monster. Counties continue to be socked by rapid spending growth in the state’s Medicaid program, for which they are billed for roughly 6 percent. They have no control over who gets paid what for which services, and the growth rate is rapidly outstripping the normal rate of growth in population, property development, and retail sales that generate local-revenue gains.

* School facility needs. A combination of enrollment increases in public schools and Easley’s imposition of class-size reductions in elementary grades has led many counties to take on additional debt loads to finance school facilities. The bills are coming due.

* Undisciplined and unjustified spending. You didn’t think I was going to let city and county officials off the hook, did you? Local governments overspend almost to the same degree that state and federal governments do. During the booming years of the 1990s, they took on unnecessary obligations far outside their core functions, including new “economic development” activities and entertainment attractions, the funding for which is now crowding out dollars for legitimate local services.

So what’s the solution? Several local governments are pushing the state legislature to act on one notion this year: local authority to levy new taxes other than property taxes. For them, you see, the problem isn’t that the tax burden continues to rise. The problem is that taxpayers, armed with property-tax bills, can tell.

Hood is president of the John Locke Foundation and publisher of Carolina Journal.