Officials: Sales tax

increase will likely

fuel state budget
By Scott Nicholson

The state government is not shutting down, despite gridlock in budget negotiations.

While lawmakers failed to adopt a budget by the start of the fiscal year on July 1, they approved a temporary spending bill to keep the government operating and paying its employees.

A conference committee made up of members of the N.C. House and Senate have been debating a final budget for several weeks, facing several billion dollars in budget cuts and at odds over tax increases and cuts.

N.C. Rep. Cullie Tarleton (D-Watauga) said dispute over new taxes is holding up the budget. He favors a tax overhaul but believes it should not be done in a “reactionary mode.” For the new budget, he favors additional “sin” taxes on items such as cigarettes, beer and liquor.

“The appropriation piece is 90 to 95 percent done,” Tarleton said. “I was a conferee on the education piece and made our report to the appropriation chairs. The unknown, as we sit here today, is the revenue package.
The House and Senate cannot agree on how much the revenue package will be or where the new taxes will be.
There is agreement that we need a revenue package in the budget so the worst cuts in education and health and human services be restored.”

Tarleton predicts the new revenue package will fall in the $900 million range, though he opposes Senate proposals to boost revenue through taxes on electricity, unemployment benefits and social security benefits.

“We’re a long way apart,” Tarleton said. “I suspect when all the dust settles, we’ll see an increase in the sales tax and a tax on some services, but not nearly as far as the Senate is proposing.”

N.C. Sen. Steve Goss said he was concerned about not just this year, but the budgets in the year ahead. He also favors tax cuts for businesses to help create jobs.

“We’re somewhat at an impasse,” he said. “This is unprecedented. Last fall, we still had a budget surplus. It’s gone down to a $4.6 billion deficit. I’ve been reaching across the aisle to gets some bipartisan support to save some of these teaching jobs but so far I haven’t been successful.”

Goss said the transportation appropriations were completed because they are based on the gasoline tax, but he said even with federal stimulus funds, the state will come up several billion dollars short.

“The biggest concern is years two through five, when we don’t have the stimulus funds,” Goss said.
“Quite frankly, there is no easy answer.”

Goss said there could be some income-tax cuts but the state was in an emergency and he was still looking at all revenue options.

“I am looking at every possibility,” Goss said. “The main thing I’m concerned about is how we can raise the revenues without harming our residents.”

The continuation budget keeps spending at 15 percent below 2008-09 levels until at least July 15, which is the new deadline for budget passage.