GROUPS URGE INCREASE IN TAXATION, SPENDING

Fearful their programs may be slashed to balance the state budget, various advocacy groups are urging the General Assembly to raise taxes instead.

Lawmakers did so when confronted with a fiscal crisis a decade ago. But the political climate in Raleigh has changed, and few legislative leaders – Democrat or Republican – are advocating a broad tax increase this year.

A weakened economy, depleted emergency reserves and soaring health care costs with Medicaid and the state employees’ insurance plan have prompted key budget writers to discuss deep spending cuts in education, health and human services and other areas of North Carolina government.

State Senate appropriations chiefs said Wednesday that they expect to have their $ 14 billion spending package ready for consideration early next week, quite possibly on Memorial Day.

Leaders say the document will include between $ 185 million and $ 200 million in additional revenue that results from closing tax-code irregularities or loopholes – but no general tax increase.

”We’ll close loopholes, but that’s it,” said Senate President Pro Tem Marc Basnight, D-Dare.

Others want the legislature to go further and raise taxes enough to forestall any cuts. During a rally Wednesday at the Legislative Building, several hundred people pleaded with lawmakers not only to spare but to expand services for the poor, disabled, the elderly and children.

Approximately 200 organizations, including the N.C. Association of Educators, the N.C. Low-Income Housing Coalition and the state AARP chapter, signed on in support of the pitch.

”We understand that our state faces a nearly $ 1 billion deficit and that there are no easy answers to solving our budget dilemma,” said Pam Seamans, chairwoman of the Covenant With North Carolina’s Children.

”But we say to you that it is not acceptable to plug the budget hole by decimating services to the most vulnerable North Carolinians.”

Among those in the crowd was Yancey County resident Heather Dawes, whose 7-year-old son Dalton was wait-listed for N.C. Health Choice, a state program that insures low-income children. Private insurance firms will not cover Dalton, who has hemophilia, and the state has stopped accepting clients because it is short on money.

”My family has to consider moving to another state,” Dawes said. ”We can’t afford it.”

The group said lawmakers should close tax loopholes that Gov. Mike Easley has suggested – some of which the Senate will incorporate in its budget. Among the possibilities are taxing satellite TV at the same rate as cable TV, eliminating the sales tax cap on luxury cars and ending myriad corporate tax shelters.

But in its plan, the coalition also urged other tax increases to bring the state several hundred million dollars.

Dan Gerlach, director of the left-leaning N.C. Budget and Tax Center, said the legislature could decide how to raise that money. ”We’re crossing the threshold today of, do we need to raise revenue? We say ‘yes,’ ” he said.

Among the options are taxing professional services and raising state income or sales taxes.

An additional penny on the sales tax would net the treasury about $ 780 million a year, said David Crotts, senior legislative fiscal analysts. A quarter-percent hike on income tax rates could bring in roughly $ 300 million, he said.

The legislature has resorted to higher taxes during budget difficulties, most notably in 1991 to cover a $ 1.2 billion revenue shortfall.

But when Republicans gained control of the House three years later, the legislature pushed through tax cuts totaling more than $ 1 billion. Democrats have recaptured a majority but the mood among legislators remains cool to raising taxes, viewed as political dangerous.

The sentiment is alive and well. Eighteen senators and 61 representatives have signed a pledge from Citizens for a Sound Economy to hold the line on taxes this year.

The group’s state director, Jonathan Hill, said the commitment covered tax loopholes and he would hold lawmakers accountable.

”If a loophole means it’s a tax increase for someone, then it’s a tax increase,” Hill said. Contact Eric Dyer at (919) 832-5549 or edyer@news-record.com