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House's Tax Writers Choose to Resist Reductions

BY Tim Simmons
04/16/2003
by Tim Simmons on 4/16/03.

Unwilling to increase state taxes on cigarettes, House
lawmakers charged with assembling a balanced budget chose instead
Tuesday to delay reductions in the sales tax and income taxes
adding up to $ 384 million.
The decision paves the way for the full House of
Representatives to begin debate today on a $ 15 billion budget and
greatly improves the chances of the bill reaching the Senate by
the end of the week.
The tax package crafted by the House Finance Committee would
delay for two years a half-cent reduction in the sales tax,
keeping it at 4.5 cents, and a half-percentage point reduction in
the income tax rate -- from 8.25 percent to 7.75 percent -- for
residents in the highest income tax bracket.
Delaying the tax reductions was part of a plan put forward by
Gov. Mike Easley in his recommended budget. The House panel,
however, did not go along with other parts of Easley's plan.
Those provisions would have delayed an increase in the child tax
credit and delayed an increase in the standard deduction to
eliminate the "marriage penalty" for couples who file tax returns
jointly.
During hours of debate Tuesday, members of the House
tax-writing panel began arguing the merits of raising the
cigarette tax by 45 cents and ended with an agreement to delay
the planned tax reductions. As legislators debated the issue
inside committee rooms, an antitax group, Citizens for a Sound
Economy, rallied outside the Legislative Building.
Rep. Paul Luebke, a Durham Democrat, said the key step in
keeping the budget talks on schedule occurred Monday evening when
Democratic House Speaker Jim Black invited several supporters of
the tobacco tax into his office.
At the meeting, Luebke told the speaker that at least a
half-dozen members of the Finance Committee wanted a fair shot at
winning approval for a cigarette rate hike before taking up other
tax measures. Black agreed.
Tuesday afternoon, supporters from health advocates to clergy
lined up to support the bill, most saying a decrease in teen
smoking that a tax increase would trigger made the proposal
worthwhile regardless of budget implications.
"This has nothing to do with being Republican, Democrat,
conservative or liberal," said Jim Goodmon, chief executive of
Capitol Broadcasting, which owns area CBS and Fox affiliates.
"This isn't about politics. Kids are dying over this. If you had
a billion-dollar surplus, you should be doing this."
Opponents said they feared an increase could actually decrease
revenue by driving down purchases in border counties and
eliminating sales to out-of-state visitors who stop along North
Carolina's highways specifically because tobacco is cheap here.
Others said it wasn't the job of the lawmakers to force others
to make healthy choices.
"I didn't hear anybody mention personal responsibility in this
debate," said Rep. Billy Creech, a Republican from Clayton.
"What's next? Obesity is a problem. Maybe we ought to think about
a tax of 50 cents on a burger or a Big Mac."
Lacking the votes to win, the sponsor of the cigarette tax,
Rep. Jennifer Weiss, a Cary Democrat, withdrew her bill.
"We wanted a fair debate before we would lend our support to
any other options. We got that debate," Luebke said afterward.
Luebke and Weiss were not happy with the outcome, but both
felt they had made progress merely by persuading lawmakers to
consider a cigarette tax hike.
North Carolina's tax on a pack of cigarettes was last
increased in 1991. Only Kentucky and Virginia have lower rates.
An increase to 50 cents a pack would generate about $ 260 million
a year.
After a brief afternoon recess, the House tax panel voted
22-13 to delay the tax reductions.
Children's advocates complained that the spending plan still
leaves them as much as $ 800 million short in critical areas, but
no lawmaker suggested a larger tax package. Republicans offered
little serious opposition, with some suggesting openly that they
knew there was little they could do to stop the proposal.
Without the votes to defeat the proposal, opponents were
reduced to questioning and criticizing a variety of smaller fees
of less than $ 250. The fees cover such services as day-care
licensing, emergency medical services licensing and oversight of
health-care facility construction.
Rep. Sam Ellis, a Raleigh Republican, offered the only
seriously debated amendment, which would have relieved EMS
providers of additional fees by increasing the proposed fees to
16 hospitals or clinics authorized to perform abortions. His
proposal would have raised fees to clinics from $ 700 each to
$ 4,562 each. Ellis' amendment failed 16-19.
"There are some things in this bill that I don't like either,"
said Rep. Joe Hackney, a Democrat from Orange County. "But it's
the time of year when you get a proposal that's reasonably
acceptable to most everyone, and you go with it."
Tuesday night, the Rules Committee merged the spending and
revenue plans into a budget bill that the full House will debate
today. But Black and Republican Speaker Richard Morgan did some
tinkering with the spending plan.
They restored $ 590,000 that had been cut from the Center for
Death Penalty Litigation. The center uses the money to train and
assist private lawyers and public defenders representing poor
people facing the death penalty. They also removed about $ 90,000
in cuts to economic development programs in the Commerce
Department that assist minorities.
Action on the state budget, which is about $ 700 million more
than the current year's, is coming this legislative session much
more quickly than in recent sessions.
For those unaware of the typically glacial pace, Rep. David
Miner, a Cary Republican, offered a history lesson before
introducing the revenue package early in the evening. "It is
April, and the House has a budget bill," he said. "This hasn't
happened in 20 years."
###
Staff writer Dan Kane contributed to this report.
###
DELAY TAX CUTS? THEY WOULD
A $ 15 billion spending plan expected to be voted on today by
the state House proposes delaying tax cuts that would have taken
place July 1. The plan would:
- Delay a half cent reduction in the state's sales tax,
keeping it at 4.5 cents for two years. Cost to taxpayers in the
next fiscal year: $ 346.5 million.
- Delay a half-percentage-point reduction in the state income
tax rate -- from 8.25 percent to 7.75 percent -- for residents in
the highest income tax bracket for two more years. The bracket
covers individuals earning $ 120,000 or more and couples earning
$ 200,000 or more. Cost to taxpayers in the next fiscal year:
$ 37.5 million.
###
Staff writer Dan Kane contributed to this report.
###
PROPOSED FEE INCREASES
Here are fee increases included in the state House of
Representatives' spending plan. Except for the new ferry tolls,
all fees would begin in the new fiscal year beginning July 1.
- TOLLS FOR FERRIES. Four state ferries would begin charging
tolls: Hatteras-Ocracoke, Bayview-Aurora, Cherry Branch-Minnesott
and Currituck-Knotts Island. The tolls would be in the range of
what three other ferries already charge, $ 1 for pedestrians to
$ 45 for large vehicles. The new ferry tolls would start July 1,
2004.
- LICENSING FEES for hospitals, nursing homes and group homes.
The health-care facilities would pay license and regulatory fees
between $ 250 and $ 950, and nearly all would pay an additional fee
of $ 12.50 per bed. They also would face new construction fees,
ranging from 10 to 20 cents per square foot. Family care homes
and group homes would be assessed construction fees ranging from
$ 100 to $ 275.
- EMERGENCY MEDICAL SERVICE FEES. EMS personnel would pay a
$ 90 credentialing fee. EMS providers would pay an annual $ 50
license fee per vehicle. EMS dispatch programs would pay $ 185
annually. Volunteer providers and personnel would be exempted.
- CHILD-CARE LICENSING FEES. Child-care centers would pay an
annual licensing fee ranging from $ 35 for those with fewer than
13 children to $ 400 for those with more than 100 children.
- PAP SMEAR FEES. Local health departments and other state
facilities would pay an additional $ 7 to have pap smear analysis
conducted by the N.C. State Laboratory of Public Health.
- OFF-ROAD DRIVING. People wanting to drive off-road vehicles
at the Fort Fisher State Recreation Area would pay a $ 40 annual
fee.