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Tax plan falls apart after Perdue objects

Posted July 23, 2009

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— A tax package crafted by House and Senate Democrats fell apart Thursday afternoon after Gov. Beverly Perdue said she wouldn't support a provision calling for an extra tax on individuals and businesses that didn't pay enough income tax during the year.

"We're back to the drawing board," said Schorr Johnson, spokesman for Senate President Pro Tem Marc Basnight.

State budget Lawmakers back to drawing board on budget

After weeks of stalled negotiations over a new state budget, lawmakers reached a breakthrough this week on a plan to raise $982 million in new revenue to help erase a projected $4.6 billion deficit.

The plan, which House and Senate Democrats approved on Wednesday, called for a temporary 1 percent increase in the state sales tax rate and a 2 percent income tax surcharge. The surcharge would apply only to income taxes still owed at the end of the year because individuals underpaid on their withholding or because businesses haven't paid enough when filing their estimated quarterly taxes.

Senators expressed reservations about the plan Wednesday because they never felt comfortable with either a sales tax or income tax increase. When Perdue expressed her concerns about the income tax surcharge to Basnight and House Speaker Joe Hackney, the Senate Democrats pulled out of the budget negotiations.

Perdue then publicly chastised lawmakers, saying she was "stunned" by the idea of an income tax surcharge.

"Who in the world thinks that, in these trying, challenging times for families, you can raise income taxes for working families, for middle-class families?" she told reporters in a hastily called news conference.

Beverly Perdue Perdue scolds lawmakers over tax plan

Perdue previously proposed a similar sales tax increase, as well as taxes on some services to raise as much as $1.6 million in additional revenue. She said the taxes are needed to avoid drastic cuts to education spending.

"I would like to see the General Assembly in Raleigh doing what they were elected to do. I'd like to see them coming to a consensus and not coming up with new options," she said. "The clock is ticking. Do the job you were elected to do and produce us a budget that protects the public schools and doesn't raise taxes on the middle class."

Lawmakers said coming to a new agreement won't be easy.

"We're going to be here for a while, for a long while probably," said Sen. David Hoyle, D-Gaston, one of the chief budget negotiators. "We're here for weeks, if not months."

Senators preferred to lower income and sales tax rates and raise revenue by adding taxes to dozens of services that have never been taxed, such as car repairs, lawn maintenance, manicures and appliance installation.

House members said they couldn't negotiate on a service-tax concept, meaning the Senate likely will draft and debate a bill spelling out how such taxes would work before returning to the budget negotiations.

"The Senate should have done this about two months ago – put their ideas on a piece of paper – but I'm glad they're going to start now," House Minority Leader Paul Stam said.

Senators said they planned to leave Raleigh Thursday night and likely wouldn't return to begin hammering out their plan until next Tuesday.

The state has been operating under a continuing resolution since the start of the fiscal year on July 1. The current stopgap measure, which expires on July 31, allows the governor and state agencies to spend no more than 84 percent of what was approved in last year's budget.

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  • Objective Scientist Jul 24, 2009

    Hmmmm... am I incorrect in recalling that the increase in income tax that Perdue opposes and threatens to veto the budget bill if it contains that tax, was in the news for days or even a couple of weeks? Why did Perdue not step up immediately when it was first reported that the NC House and Senate were considering the tax increase? As a life long citizen and tax payer in NC I don't think it unreasonable to expect that our government, executive and legislative branches, "talk to each other" and eliminate or at least reduce significantly such inefficiency! This is ridiculous... Perdue should have spoken up immediately! And for clarity... I am an "INDEPENDENT" and have been all my voting life of ~40 years, so I'm not picking on a Democratic Governor for political reasons, rather pragmatic ones!

  • larieke Jul 24, 2009

    The state Department of Health and Human Services said Friday that it will pay back more than $300 million to the federal Medicaid program that was mistakenly paid out because of accounting and billing errors.

    DHHS will return approximately $200 million to the U.S. Centers for Medicare and Medicaid by July 31 and will pay the rest over the course of the next fiscal year.

    So what, pray tell, was the state going to do with that money if the error wasn't discovered.

    Looks like we need some old fashioned investigative reporting.

    See story buried unter STATE NEWS

  • Professor Jul 24, 2009

    Perdue continue to mess up for NC. Do NC a huge favor Purdue and step down immediately. Thanks.

  • Bendal1 Jul 24, 2009

    Purdue didn't get her $1.5 billion in tax increases so she uses the income tax tax as an excuse to withhold her support for the budget. She then tells everyone she didn't expect the legislators to raise income taxes but she told everyone earlier she would support whatever tax plan they came up with.

    She's a liar; she'll oppose any tax increase if it doesn't give her the money she wants, but if they give her $1.5 billion in new taxes I predict she'll accept however they do it.

  • larieke Jul 24, 2009

    The 2% surcharge is simply to easy for the citizen to control whether or not they have to pay it. Who ever heard of a Democrat allowing citizens to control their own tax destiny? I'm beginning to think Perdue is smarter than the Democrats in the legislature. Ahh...Nah.

  • rand321 Jul 24, 2009

    Perude should be ashamed of not having her represenatives who were privy to the negogiations to not tell the legislators the objections to the sur tax. Secondly, to act that she did not know either indicates she has hired people to report to here that do not tell her squat or she choses not to listen.

    I am thinking she is trying to come off as Super Bev, to the taxpayers rescue. HAHA! Bev, take it to Comic Con this week for your faux concerns for the taxpayer.

    I am disappointed that she has not shown more leadership. I for one do not approve of her performacne in office and this stunt does not help.

  • methinkthis Jul 24, 2009

    When they fail to meet the deadline for the budget, their per diem and expenses should stop. That was their budget to get the job done. They still owe us the job and should not get any more money to complete it.

  • methinkthis Jul 24, 2009

    The dilemma the state finds itself in is a direct result of a failure to keep a 'rainy day' fund, a reasonable surplus. Now that they have spent every cent plus committed more via bonds, it is totally irrational for the legislature or governor to be promising temporary tax hikes or surcharges. There is zero reason to trust them since they have blown it all away before. I want to see a budget that has surplus in it. I don't want to see pork for the leaders in special spending for piers and roads that have no cost immediate benefit that exceeds expense. If these people were in private business and managing it this way they would be FIRED.

  • Zillardd Jul 24, 2009

    We have redundant systems throughout the State Govt. and groups literally dreaming up things in the last minute to increase their budget on a yearly basis. Every administration tries to leave a legacy, usually piled right on top of a previous legacy. Smart Start, more at four... I say strip it down. Find redundant and combine and reduce them. Use natural attrition and retirement but start reducing this crazy cancer we have in state Govt. that has lead from 8-10 Billion per year to the monster we have today with basically nothing to show for it. If a disappearing program is needed a private group will provide it, and it will create jobs through opportunity.

  • ncemployee Jul 24, 2009

    Ok. I am a state employee. I have a deadline of June 30 on a project and I have known about project for a long period of time. I tell my manager back in January that I could do this project in hours because I know it like the back of my hand and I could do it line by line because I know where to make the changes. I miss my deadline and receive an extension. My manager tells me she is unhappy but will not tell me exactly how to do the project. I miss my second deadline. My manager is still unhappy but won't state what she wants. I need a further extension. Do I still have a job. Anyone?

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