Groups Aim to Thwart Tax Hikes

When the General Assembly needed money last year to balance North Carolina’s finances, it raised taxes.

As lawmakers prepare for another session during which budget woes will top the agenda, groups opposed to higher levies are applying pressure so that state leaders avoid taking the same path.

The Democrat-controlled legislature tentatively approved a $14.7 billion budget last fall for fiscal 2002-03, which begins in July. But a soft economy has lowered revenues and could leave the state with at least $1 billion less to spend than was originally thought.

Several months before lawmakers return to Raleigh for their even-year “short session,” legislative budget writers and Democratic Gov. Mike Easley are pondering cuts, not tax increases.

Fiscal conservatives have organized protests and circulated petitions to make sure that resolve sticks.

“We’re just trying to get the public focused on this issue and to discourage the short session to have another tax increase,” said Jonathan Hill, state director of Citizens for a Sound Economy, which today will co-sponsor an anti-tax rally in Raleigh. It follows similar events last week in Winston-Salem and Wilmington.

“Our government has a spending problem that must be stopped,” he said.

The efforts may not be necessary. Key legislators say they sense little interest among their ranks in increasing taxes during a year when all 170 House and Senate seats are up for election.

“People are reluctant to raise taxes when they have to face the voters,” said state Rep. Gordon Allen, D-Person, co-chairman of the House Finance Committee.

But, he added, the budget situation “may be so bad that we have to find some new source of revenue.”

Such a change of heart occurred last year when lawmakers supported higher taxes only after earlier revenue projections were deemed overly optimistic.

That energized tax foes, who peppered lawmakers with e-mail and staged a demonstration – dubbed the “Tar Heel Tea Party” – outside the Legislative Building.

Still, the campaign did not stop the legislature from passing a budget with $440 million in tax increases for 2001-02. Only one Republican lawmaker joined with all Democrats to vote for the plan.

Levies on products such as telephone calls and liquor were boosted, and the sales-tax rate went up a half percent. Wealthy North Carolinians also were hit with higher income taxes.

Just as ineffective was a pledge that Citizens for a Sound Economy circulated among lawmakers seeking promises to hold the line on taxes. Eighteen senators and 62 representatives signed the vow, but 15 legislators broke their word.

This year, another outfit – the Foundation for North Carolina’s Future – has distributed a similar pledge that at least 25 lawmakers have signed.

Richard Vinroot, the foundation chairman, said he cannot understand why lawmakers would take more money from taxpayers as the state tries to dig out of a recession.

“I’m very concerned that they will want to raise taxes again,” said Vinroot, a Republican who in 2000 ran for governor against Easley. “I see the signs. That ‘s the easy way out. It was last year.”

Even the recent tax increases could not keep the current budget afloat.

Lawmakers based the spending plan on the assumption that revenue would grow 4 percent. Analysts now say tax collections might decrease as much as 3 percent, the result of the lingering recession and fallout from the Sept. 11 attacks.

Easley has cut more than $1 billion to avoid a deficit before the current budget expires June 30.

North Carolina is not unique in this respect. Most states are facing shortfalls this year and similar problems with their forthcoming budgets.

To get a grasp on the state’s precarious fiscal condition, legislative budget committees already have begun to meet. The General Assembly is scheduled to convene May 28.

From every angle, the situation seems grim. Easley has asked state agencies to propose spending cuts in fiscal 2002-03 as deep as 11 percent, which could lead to layoffs and fewer government services.

Hardest hit might be Medicaid, the health-insurance program for the poor with costs spiraling out of control. To curb expenses, the state Department of Health and Human Services detailed numerous options last week. Among them were eliminating coverage for podiatry, optometry and adult dental services; reducing private-duty nursing; and trimming payments to pharmacies and hospitals that serve Medicaid patients.

Despite the dismal outlook, Easley is not inclined to go on TV and push a tax increase as he did last year, said spokeswoman Cari Boyce.

She said the governor instead will suggest that lawmakers approve one of his pet projects – a state lottery for education.

But a game of chance, if approved, probably would not bring in enough revenue to protect existing government services.

To counter the anti-tax forces, advocates for children and the poor say they intend to reignite their campaign from last year in favor of stiffer levies rather than painful cuts.

“We’ll have the same message,” said Paula Wolf, chief lobbyist for the Covenant with North Carolina’s Children. “Yes, the state budget is in dire straits, but we can’t balance it on the backs of vulnerable children and families.

“We have to look at ways to raise revenue. This is not the time to cut these programs. These are legitimate roles for government.”

Senate Minority Leader Patrick Ballantine said few Republicans will go along.

“Raising taxes … is poor leadership,” said Ballantine, R-New Hanover.