Now, with the state unemployment rate at a six-year high and a government budget shortfall that could reach several times the current amount of $230 million, the candidates for North Carolina governor have been talking more and more about belt-tightening in the state.

"We're going to have to reduce spending in the state of North Carolina," said Charlotte Mayor Pat McCrory, the Republican nominee. "We're not going to have any choice."

But difficult economic times still don't prevent McCrory, Democratic candidate Beverly Perdue and Libertarian nominee Mike Munger from promoting plans to lower taxes -- either through rate reductions or targeted relief for low-income families and the elderly.

In surveys with The Associated Press and other public comments, the candidates say the economy will benefit from lower taxes -- by helping families struggling to make ends meet or by freeing up money to spend, invest and create additional jobs.

"We've got to find a way to cut the income tax, and the gas tax and the food tax," Munger, a Duke University political science professor, said at a recent debate. "Those things hurt us a lot in attracting outside business."

Perdue, the lieutenant governor, wants to expand the state's new earned income tax credit and provide targeted tax incentives for small business.

Getting the General Assembly to lower taxes will be difficult for a new governor next year if faced with a $1 billion-dollar-plus shortfall.

Unlike the federal government, which can borrow money to plug a deficit, North Carolina state government must balance its budget. So the state can't simply hope that tax cuts will generate more economic activity, and therefore, more revenue to fill any budget hole, said Roby Sawyers, an accounting professor at North Carolina State University.

"It's really hard to see how a new administration and a new governor (are) going to cut taxes, particularly in light of what's happened over the last six months with our budget situation," said Sawyers, who also worked for a state commission that looked at modernizing the state's tax structure.

Perdue and McCrory both say they have what it takes to trim spending and provide tax relief in their administration.

Perdue, a former state Senate budget-writer, said she was able to fashion a $850 million spending plan for Hurricane Floyd relief in 1999 "without raising one single cent of taxes." McCrory said he's worked with a Democratic-controlled city council in creating budgets for North Carolina's largest city.

The three candidates agree that the state's tax burden needs to be reasonably close to those in other states out of fairness, or so it doesn't become a stumbling block to companies building in the state.

The Tax Foundation, a nonpartisan research group, says North Carolina's state and local tax burden as a percentage of income ranks 20th in the country, at $3,663 per capita, or just above the national average. Data from the Federation of Tax Administrators ranked North Carolina's state and local revenue 27th among the states and the District of Columbia as a percentage of personal income in 2006.

McCrory said he wants to lower the state's 6.9 percent corporate income tax rate and the individual income tax rate for the highest wage earners of 7.75 percent, which are the highest marginal rates in the Southeast.

The State and Local Fiscal Modernization Study Commission recommended last year that those taxes should be reduced if the income is broadened to eliminate loopholes or other breaks that have eroded the tax base. At the same time, the panel said, more low-income people should pay no income taxes at all.

"It's clear that we can have a far more economically efficient and fair system that raises more revenue while preserving and even enhancing our tax competitiveness," Perdue said in the survey.

Getting such ideas passed has been difficult for fear that certain interest groups and legislative candidates will use incumbents' votes for the tax changes against them on Election Day.

"Tax reform is always going to be an uphill battle because (cutting) taxes are the first thing that lots of politicians look at to make part of their agenda," said Elaine Mejia with the liberal-leaning N.C. Budget and Tax Center.

The three candidates, concerned about the state's increasing debt, also said they would support requiring all debt to be voted on in a state referendum. However, Perdue and Munger pointed to some small exceptions where legislative approval may be enough.

The General Assembly has authorized more than $3 billion in so-called "special indebtedness" from 2001 through 2012 that didn't require approval by the public, according to state documents.

Lawmakers already had doubled the state's annual debt service as a percentage of tax revenues to $681 million, even before the latest batch of debt was approved in July.

"An awful lot of our future budget five years from now is going to be tied up in debt service," Munger said. Legislative leaders point out the state's overall debt remains within guidelines set by the state treasurer to keep the state's cherished triple-A bond rating.

Munger stands apart from the other candidates on whether to continue offering tax breaks to lure large businesses to create jobs in the state. He calls such incentives "economic prostitution" and said the state doesn't get a return on its investment.

McCrory and Perdue both said they would be selective about offering incentives, rewarding companies that would generate high-quality jobs. They said that broader improvements to the state -- including an educated work force, roads and infrastructure -- would be the best motivation for companies to set up shop in North Carolina.

Perdue said if elected she would work to reach an agreement with other states to end the high-stakes incentives: "However, as long as the 49 states continue to offer such incentives, North Carolina must be prepared to compete."