State News

N.C. House agrees to tax package as part of budget

Posted June 11, 2009 6:27 p.m. EDT
Updated June 11, 2009 7:33 p.m. EDT

State budget

— The full state House agreed Thursday in a party-line vote to a portion of its proposed North Carolina state budget that would raise taxes by nearly $800 million.

The House voted 64-52 in favor of higher sales and income taxes, as well as increases on liquor and movies.



Democratic speakers said new revenues are needed to restore education and human services programs slated to be slashed otherwise. Rep. Phil Haire of Jackson County said the fiscal conditions require the higher taxes to "stop the bleeding."

Rep. Nelson Dollar, R-Wake, said it should be called "the blue-collar tax increase" because it would hurt working people the hardest.

The vote comes as the House tries to pass its budget version by early Saturday.

Faced with an unprecedented 11 percent decline in total tax collections compared to last year, the House had to dig $1.5 billion deeper than either the Senate or Gov. Bev Perdue recommended in their budget proposals less than three months ago.

The budget plan would raise $784 million in additional taxes, about $86 million in fees and spend $1.3 billion in federal stimulus money to close a budget shortfall.

Parliamentary rules require lawmakers to agree to the tax changes separately - including higher sales and income tax rates and levies on liquor and digital downloads - before the current budget can move forward.

That means the House couldn't approve a combined spending and tax plan until after the clock strikes midnight late Friday, at the earliest.

House and Senate leaders are aiming to present a final budget to Perdue before the new fiscal year begins July 1.

Even with the $784 million in proposed tax increases, funding for several thousand state positions still would be eliminated.

Calling it the House version of the budget a "modest revenue package," UNC System President Erskine Bowles said in a statement late Thursday that it would lessen deep cuts to education and other critical state services.

For example, it would restore about $75 million to the university system and save 600 jobs and allow for more classes.

Bowles said he still concerned about the remaining $263 million in cuts and their impact on the quality of education at the university level.

Other areas in the proposed budget that would be restored include 2,590 teaching jobs for kindergarten through third grade as well as money cut from public health and mental health programs and about $50 million in cuts to the Department of Correction.