House Democrats May Have Solution To State Budget Battle

The Democrats' tax plan allows local government the option of raising the local sales taxes by half a penny. A new income tax bracket will mean higher taxes for incomes over $200,000. They are also proposing a six percent tax on hard liquor.

Tax cuts include the elimination of the marriage penalty and a higher tax credit for children.

Support for the plan is predictable. While some Democrats like the plan, many Republicans see it as a poorly timed tax increase.

"We have a mix of taxation in there. We have some things that the counties and cities have asked for [such as] the Local Option Sales Tax, which tends to hit middle- and upper-income people higher. We also have a new income tax bracket proposed for people making more than $200,000" says Rep. Paul Luebke (D-Durham).

"Overall, it's going to take money out of the pockets of working families in North Carolina at the very time that we are in a downturn in the economy. That's about the worst thing that can be done," says Rep. Art Pope (R-Wake).

The measure will be debated on Wednesday. A full House vote is likely on Thursday. Governor Mike Easley is preparing his own tax plan that could be released as early as today.

WRAL.com has learned that the Governor's tax plan will likely track the House Democrats' plan, except that Easley is likely to propose a tax on all alcoholic beverages.