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RALEIGH — North Carolina would raise

$1.6 billion in new taxes under a plan Gov. Bev Perdue offered to legislators Tuesday in an effort to break a logjam in budget negotiations.

The state began its new fiscal year on July 1, facing what Perdue and state leaders describe as a $4 billion shortfall. Legislative leaders have been unable to agree on how to bridge that gap, so the state is relying on a temporary spending plan that expires July 15.

Perdue says the state loses

$5 million every day with that kind of temporary agreement and offered her proposal to prod legislators past their impasse. Members of both chambers met with Perdue Tuesday. Later, she talked publicly about her plan.

“That’s the revenue that’s out there; it’s the only pathway that I know that exists,” Perdue said.

Perdue is a Democrat as are the leaders of the House and Senate. All agree that they need to raise taxes but members describe intense philosophical disagreement over which taxes to increase and by how much.

Senators favor a rewrite of the tax code that lowers income and sales tax rates but taxes more items. House budget writers are leery of those changes and would rely more on raising the sales tax rate and creating new upper-end income taxes.

Perdue splits that difference by:

• reducing the top three income tax rates but adding a temporary “emergency surcharge” for high income earners, defined as $500,000 for a single taxpayer.
• adding an “emergency” 1 cent sales tax that would end on Sept. 30, 2010.
• applying the sales tax to a bevy of new items, including certain online purchases, courier services and plastic surgery.
• raising taxes on cigarettes by 50-cents per pack and raising taxes on beer, wine and spirits.
   

“I really do fundamentally believe it’s critical that this state remain true to public schools and to education, and the General Assembly has an obligation to act on behalf of all those kids,” Perdue said.

Legislators did not embrace any one point of Perdue’s plan, but both House Speaker Joe Hackney, a Chapel Hill Democrat, and Senate leader Marc Basnight, a Manteo Democrat,  described Perdue’s intervention as helpful.

Hackney said that Perdue’s idea to make some of the tax increases temporary by affixing an expiration to them could help bring House and Senate negotiators closer together.

But Basnight said that the public would rightly be skeptical of the “temporary” label applied to two of Perdue’s proposals. That’s because part of a temporary sales tax enacted in 2001 remains on the books.

“I would be too, I would join in with the public,” Basnight said.

And legislators would not be able to require that the members of the General Assembly who take office in 2011 remove the tax.

“You do that for the sole purpose of announcing that this tax, in our belief, needs to come off at this stated time,” Basnight said.

Asked why the public should believe the taxes in question would be temporary, Perdue said: “Because I’m the governor.”

Governor or not, Perdue can only sign a bill sent to her by the General Assembly. Members said Tuesday it was unlikely they would propose a tax increase as high as $1.6 billion. Basnight and Lexington Democrat Hugh Holliman said that an amount close to $1 billion was more likely.

Rep. Alma Adams, a Greensboro Democrat, said that Perdue’s tax proposal was akin to other ideas she had seen floated. Adams is one of the lead budget writers responsible for spending the money raised through taxes.

Although the House and Senate have differences over where to spend money — the House wants to see more spending on public schools, for example, while Senate budget writers favor spending more on the university system — Adams described those differences as manageable.

“The biggest problem is the money, what the tax package looks like,” Adams said. “We haven’t been able to come up with a compromise.”

With no compromise in sight, legislators began talking Tuesday about the possibility of extending the temporary budget until the end of the month.

“At times you think you’re very close and it takes you a week to get something worked out, at times you think you’re miles apart and it comes together in an hour,” said Sen. Tony Rand, a Fayetteville Democrat and the majority leader in the Senate. “It’s just very difficult to say right now.”

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com