North Carolina to Raise Cigarette Taxes to Off-set Budget Shortfall
Raising of state cigarette tax surfaces anew
Since budget shortfall is projected, 'something is probably coming along that line,' speaker says
By David Rice
JOURNAL RALEIGH BUREAU
Wednesday, December 15, 2004
North Carolina is facing a projected shortfall of $1 billion when temporary sales and income taxes expire next year, so House Co-Speaker Jim Black is discussing with tobacco companies the prospect of higher cigarette taxes, he said yesterday.
"I've had some discussion with the tobacco companies and members of the House, and they understand that something is probably coming along that line," Black told reporters after the House Democratic caucus nominated him for a fourth term as speaker.
Though Senate leader Marc Basnight has long favored higher taxes on cigarettes and alcohol, Black has been more reluctant until now. But he said yesterday that even cigarette-makers are willing to discuss higher taxes on cigarettes.
"They're open to sharing their revenue for the right issues and the right use, which is still yet to be determined," said Black, who added that he was "a bit surprised" by the companies' attitude.
"That is something that even the tobacco companies have talked positively about. But we don't need any tax that we don't need," he said.
At 5 cents a pack, North Carolina has the second-lowest state excise tax in the country, behind Kentucky.
But even Virginia - the home of industry leader Philip Morris USA - increased cigarette taxes this year. In North Carolina, each 1-cent increase in the cigarette tax is projected to raise about $7 million.
Brennan Dawson, a spokeswoman for R.J. Reynolds Tobacco Co., said yesterday that even though the legislative session doesn't start until next month, "lots of people are saying that a cigarette tax is going to be necessary to close the gap."
"We would be disappointed if we were a leading revenue-raiser," Dawson said. "But we are not in negotiations.... We are in a wait-and-see mode. There are people who like to raise taxes, and Jim Black is not one of them."
Black said that after they convene in January, legislators can also be expected to consider creation of a state lottery, which is projected to raise $300 million to $500 million a year for the state.
Though Gov. Mike Easley is a lottery supporter, the last time that a lottery came to a vote in the House in 2001, it failed by 19 votes.
"We'll be looking at that as we go along," Black said.
"You never know 'til you pull the trigger. We have a reputation for wanting to know the votes are there before we do that."
He said he does not necessarily want to raise taxes, and he hopes that the state's economic recovery means bigger revenues without any tax increases.
"I always like to live within our means," Black said. "My first choice is to spend smarter, but I do not want to cut back on education."
He also noted that Judge Howard Manning of Wake Superior Court has ordered the state to spend more on its poor school systems to comply with a ruling by the state Supreme Court in the long-running Leandro lawsuit.
"The judge has spoken in Leandro. We all want to do the right thing ... not only in those jurisdictions but all over the state," Black said.
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