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

RALEIGH (AP) ó The full House agreed Thursday to add nearly $800 million in new taxes to pay for a North Carolina government budget plan in a vote reflecting conflicting partisan opinions on the extent of the state’s fiscal crisis and how lawmakers should respond.
The chamber agreed following tense debate in a 64-52 party-line vote to support the tax package penned by Democrats who said it canceled many of the onerous education and health care cuts required after state revenues dwindled. Republicans said new taxes would hurt the economy.
The sales tax rate would go up by a quarter-penny so that most consumers would pay 7 percent on purchases, income tax rates for the highest wage earners would rise, levies on liquor would increase and digital downloads would be added to the sales tax base.
Democratic lawmakers in the majority mentioned the Great Depression, when the sales tax was first introduced to the state, in defending the tax increase so that North Carolina doesn’t go backward in preparing students and protecting the least fortunate during the current recession.
“It’s going to help up stop the bleeding,” said Rep. Phil Haire, D-Jackson, one of the chief budget writers. “It’s going to keep the North Carolina education system from going down … it’s going to protect the court system.”
Parliamentary rules required lawmakers to agree to the tax changes separately before the current budget could move forward. House Speaker Joe Hackney, D-Orange, said the chamber will meet for an unusual Friday night session for the first of two votes on the combined spending and tax plan, followed by the second vote after midnight.
Republicans argued the tax increases are unnecessary because the monetary size of the budget gap has been exaggerated. They also said the higher taxes would hit the pockets of working people and discourage wealthy taxpayers from residing or keeping their businesses in North Carolina.
“The proposition that if you’re against these taxes then you’re supporting these cuts is absurd,” said Rep. Thom Tillis, R-Mecklenburg, the House minority whip.
House and Senate leaders are aiming to present a final budget to fellow Democrat Perdue before the new fiscal year begins July 1.
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. Beverly Perdue recommended in their budget proposals less than three months ago.
“The House has had the job of completely rewriting the budget,” said Rep. Jim Crawford, D-Granville, co-chairman of the House Appropriations Committee. “We’ve got a desperate situation and we’ll continue to have a desperate situation.”
The measure would raise $870 million in additional taxes and fees and spend $1.3 billion in federal stimulus money to close a budget shortfall.
Even with $784 million in proposed tax increases, funding for several thousand state employee and teacher positions still would be eliminated.
Democrats said the new taxes offer to lawmakers a way to restore the most severe spending cuts, such as dental and personal care services coverage through Medicaid, giving counties money to house misdemeanor offenders in local jails, and avoiding 2,600 teacher layoffs in kindergarten through third grade.
House Minority Leader Paul Stam, R-Wake, said the threat of deep cuts without new taxes has been overstated as a way to raise support from advocate groups to raise revenues, such as drafting schoolchildren to write e-mails.
“That’s the oldest budget trick in the book,” Stam said. For example, he said, more than 10,000 teachers leave the profession annually through attrition, or more than the number of positions that had been set for elimination without taxes.
Democrats said there was a $4.6 billion shortfall that had to be filled as the result of the declining worldwide economy, and that Republicans should welcome cuts to what have been determined to be nonessential programs.
But several school districts already have handed pink slips to teachers they don’t expect to rehire in the fall, said Rep. Rick Glazier, D-Cumberland, co-chairman of the education appropriations subcommittee.
“They’re absolutely going to be fired or have already have been fired,” Glazier said. “If you vote no, you’re saying it’s not important enough to (prevent) that.”
Rep. Cullie Tarleton of Watauga County was the lone Democrat who voted against the tax package.
The budget bill would still increase class sizes on average by two students beginning in fourth grade to save $184 million, eliminate 200 literacy coaches in middle schools and raise University of North Carolina system tuition by a maximum of $200. Eight prisons and a juvenile offender facility would be closed.
The proposed budget also is balanced by taking $270 million from dedicated pots of money, including funds from the national tobacco settlement and earmarked for state building repairs.
Higher fees to get married and divorced also would be required, while impaired drivers and motorists traveling 25 mph over the speed limit also would face additional fines of $350 if convicted.
House members considered at least 20 other amendments Thursday, agreeing to remove a proposed requirement that law enforcement officers pay $250 initially and $100 annually to meet state-mandated training requirements. The state would help pay for the training.

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