news-record.com

Gov. Bev Perdue said today she would propose a temporary 0.75-cent sales tax increase as part of her budget for 2012. The AP reports:

Perdue visited Archer Elementary this afternoon as a backdrop to propose raising the sales tax to help boost state funding for education.

Perdue plans to recommend what she calls restoring three-quarters of the penny sales tax that had been on the books for two years starting in 2009. That would raise the sales tax in most counties from 6.75 percent to 7.5 percent.

The GOP-led legislature rejected Perdue's proposal to set the sales tax at 7.5 percent, instead canceling the penny altogether.

Her announcement rekindles a debate that will be central to this year's primary and general election fights as well as the budget battle at the legislature.

And the rhetoric form both sides will be largely misleading.

For her part, Perdue and fellow Democrats will say the money is need to bolster education and avoid teacher layoffs, and denying schools a 3/4 of a penny is parsimonious. Republicans will follow their script and say that any tax increase is a bid to cripple the economy. Sen. Phil Berger, an Eden Republican and his party's leader in the Senate, sent a prime example of the expected reaction today:

Gov. Beverly Perdue today proposed a $750 million tax hike — her first of the new year. It ups the ante on probable primary opponent Rep. Bill Faison, who proposed a mere $700 million in new taxes a few short months ago.

“Obviously, Gov. Perdue’s attempt to nip this economic recovery in the bud is dead on arrival at the General Assembly,” said Senate President Pro Tempore Phil Berger (R-Rockingham). “The Democratic primary for governor apparently has devolved into a fight over who can raise the most taxes, spend the most money, and grow the biggest government. Gov. Perdue’s latest tax-hike stunt proves she can’t fix this mess she made.”

(Complete aside here, but: Why Beverly? The governor has been calling herself Bev since before she took office in 2001. It seems rude not to go with her chosen moniker.)

So is this a $750 million tax hike or merely a 0.75 cent sales tax increase? 

Well, both — and neither number may be all that relevant to you. In a sense, both are political numbers. Republicans will use $750 million to make it sound like a huge tax increase. Democrats will say "three-quarters of a penny" to make it sound utterly insignificant.

But truth be told, nobody is going to shell $750 million out of their pockets, and virtually everyone is going to pay more than 0.75 cent.

A more useful metric might be to look at the difference between the current tax rate through most of the state — 6.75 percent — and the sales tax rate if Perdue gets her way — 7.5 percent. 

Let's say you are going to buy an audio player for $150. Under the current sales tax rate, you'd pay $10.13 in sales tax. Under the Perdue-proposed rate, your tax would go up to $11.25, a $1.12 increase. Looked at another way, the cost of the player goes from $160.13 to $161.25, or an increase of 0.69 percent.

Or maybe you're going to invest $1,000 at the local electronics store in order to upgrade the man cave in time for the Super Bowl. Your tax bill would go from $67.50 to $75, a $7.50 increase.

The question you might ask yourself about these numbers is this: Would they cause you not to make the purchase or to buy something else? Would you not be able to make the purchase if the sales tax increased?

There's not a simple answer to those questions. For someone shelling out $1,000 on a new TV and surround sound, it might seem reasonable (or at least not hurt that much) to chip in an extra $7.50 toward schools and teachers. For a family trying to make ends meet who suddenly finds themselves needing to replace their kids' shoes and pants in the middle of the school year, adding $1.12 to the $150 you're shelling out at Target might hurt.

But I would submit those measures are more useful in assessing the impact of the potential tax increase than the over-hyped MILLIONS OF DOLLARS or the dismissing it as 3/4 of a penny.

A couple of additional notes:

• I didn't use groceries in my example because most food (with the exception of candy and the like) is taxed at 2 percent. More sales and use taxes at the DOR site.
• Republicans today pointed to a Civitas Institute report that claims the state has more than 4,000 more state-funded teachers than last year. I have some questions about the data, but even taking the Civitas analysis at face value, it shows an overall dip in the number of teachers in the classroom. Do parents care if there are more state-funded teachers if there are fewer teachers in total in their schools? (Side note: I've been out for a few days, but I haven't seen where any of my colleagues have picked up this report, so I can't point to any independent vetting.)

Finally, Rep. Bill Faison took the occasion to declare a victory in his not-yet-a-run-for-governor. He writes in a news release:

The Governor has finally stepped up and proposed what I have been calling for, together with seventy percent of the House Democrats, since September — restore part of the penny sales tax for education and jobs. I am happy to see that she understands that our proposal is the only way to restore opportunity for the unemployed and education. My colleagues and I led this effort to restore 7/10 of a penny sales tax to restore jobs and education cuts, together with closing tax loopholes that put a burden on working, middle class families and helping small businesses hire. It is unfortunate that the Governor did not join our efforts then or join me in letters to the GOP Leadership asking for this issue to be heard over the past months.

[Snip]

While the Governor falls further behind the likely GOP opponent, she has finally decided to endorse a solid plan, and one I proposed months ago. I could have used her help in September on this issue as I tried to have it heard in the General Assembly. Instead the GOP Leadership keeps wasting our tax dollars to the tune of $50,000 per day on divisive issues. People across the state have been so responsive to the Jobs Plan my colleagues and I put forward because it touches them on the issues most important in their lives.

A couple of observations here:

• That last paragraph is a pretty harsh criticism of the governor. If he's not running against her, I hope he's not expecting to stay on her Christmas card list.
• Perdue had called for keeping the sales tax during last spring's legislative session — going so far as to veto the budget over the lack of revenue. So is Faison following Perdue or the other way around?