RALEIGH – On Wednesday Gov. Beverly Perdue kicked off a sudden series of meetings and public rallies, filling the news headlines with a new argument that state lawmakers should hike taxes by $1.5 billion next year.
She didn’t really mean it.
Or, more to the point, Perdue doesn’t really think that the General Assembly is going to pass a $1.5 billion tax increase, with or without her support. The idea is a nonstarter, particularly given how much effort it just took House leaders to cobble together enough votes for a tax hike half that size. The Senate’s prior budget plan included a still-smaller tax package. There’s little sentiment on Jones Street for doubling down on the proposition that North Carolina’s fiscal problems are the result of North Carolinians keeping too much of their own money.
I’m not even sure that the governor believes it would be sensible to sock one of the nation’s worst economies with $1.5 billion in higher taxes. Perhaps I’m being overly generous here, but I suspect Perdue knows that such a move would be fraught with both economic and political peril.
So why did she take to the road to “sell” a huge tax hike that the voters of North Carolina, in their wisdom, are not going to be willing to buy? Because Perdue’s intended audience was not the general public. It was the North Carolina Association of Educators.
It was no accident that the governor began her speaking tour at the State Capitol before a gathering of teachers and NCAE activists. They represent a core constituency of the Democratic Party. They helped get Perdue and other Democrats elected last year. And they are mad, hopping mad, at the prospect of a 2009-10 state budget that increases class sizes, eliminates some teacher-assistant positions, and shaves some other educational expenses.
The Perdue team knows that advocating $1.5 billion in new taxes will antagonize many North Carolina voters. Already saddled with weak approval ratings and an unfavorable political climate (grand jury investigations of your Democratic predecessor in the governor’s mansion tend to have such effects), the governor’s decision to endorse a huge tax increase may seem ill-advised, even reckless.
But I think it was simply designed to placate her angry base. The teacher union is used to deferential treatment in the Legislative Building, so the rage now evident among many of its members – however disconnected to fiscal and economic reality – is very real. The final budget deal won’t have a $1.5 billion tax increase in it. Perdue will sign it, anyway. Still, she will have championed the NCAE’s cause, satisfying a political obligation. And perhaps, by the midterm elections in 2010, the voters won’t remember who said what to whom – or so the strategists may hope.
It is difficult to overstate how thoroughly the past few weeks of budget deliberations have been suffused with political gamesmanship. For example, House leaders exaggerated the magnitude of their initial budget cuts in two ways – by omitting the offsetting impact of federal bailout funds and by comparing their proposed budget to a long-outdated $22 billion continuation budget for FY 2009-10, rather than to the $20 billion the state will actually spend in FY 2008-09. Why? To make a budget without tax hikes appear unthinkable, when in fact it is practical and advisable.
North Carolinians living in communities with jobless rates of 10 percent, 12 percent, in some cases upwards of 15 percent are unlikely to be in any mood to hear that they should pay higher taxes so that state government should be spared the same adjustments the private sector is already making to economic reality.
I don’t think Perdue really expects to convince voters otherwise. She’s just hoping they’ll forget about her tax-hike tour by the time the polls open next year – and that the teacher union will remember it.
Hood is president of the John Locke Foundation