Tax Talk Continues at the Legislature

For the average taxpayer, a tax is a tax.

That’s not the case at the North Carolina Legislature.

There are tax loopholes and local option taxes – two of the less onerous versions in legislative parlance. There are “sin” taxes that put it to people who engage in dubious activities such as drinking alcohol.

And there’s the sales tax – regressive to liberals but more politically palatable to moderates.

Of course, there’s also the income tax, something lawmakers speak of in hushed tones and would never dream of mentioning in the same sentence with the words “hike” or “increase.”

In a year when the state is facing an $850 million shortfall and bleak revenue prospects for the next fiscal year, there’s bound to be plenty of tax talk.

Most of it comes from people trying to stem a tide of state agency cuts, especially to social programs, in the Senate budget proposal passed two weeks ago.

But it doesn’t stop there.

There is a growing din from county and municipal officials who have wanted another piece of the sales tax pie for years. They think the budget crisis may provide the opportunity to get it.

Counties, cities and towns now get 2 percent of the 6 percent sales tax in the state.

And in the world of local government, property taxes are akin to income taxes. Raising them is something to be avoided at all costs.

A sales tax, though, that’s a little easier to digest. Taken in bites of a penny here, a quarter there, a dollar here, it’s hardly noticeable.

That hasn’t been lost on lawmakers – Democrats and Republicans alike – who have continually filed bills to try to get “local option” sales tax increases in their specific counties.

Although those kinds of bills haven’t gone anywhere, the political variety of lawmakers who have filed them has given county officials hope.

It’s a hope spawned by the recognition that a Senate package of targeted tax increases – particular a phone tax and satellite television tax – likely won’t survive in a House budget.

House budget writers also aren’t thrilled with many of the Senate cuts to agencies and services, and are looking for additional money somewhere.

“We’re exploring every rock,” says Rep. David Redwine, D-Brunswick, co-chair of the House budget committee.

But in a closely divided House where Republicans vow to defeat any tax increase, finding more money won’t be easy.

Still, many House Republicans – and conservative Democrats for that matter – see local sales taxes differently. Ultimately it is up to county commissioners, not legislators, to pull the trigger and levy the taxes.

Giving the local governments the ability to levy an additional half cent, as some lawmakers have advocated, would allow the Legislature to pull back $330 million in reimbursements to local governments.

“It ends up a nice confluence of interests,” said Ron Aycock of the N.C. Association of County Commissioners.

Also banging the tax hike drum is a coalition of rest home and health-related groups. They released a poll last week indicating that a vote to raise the sales tax by 1 percent would make no difference to 54 percent of voters.

In the poll of 611 likely voters, just 31 percent said a sales tax increase would make them less likely to support a candidate.

“It’s like the General Assembly thinks voters are the big, bad wolf, and I don’t think they need to be afraid of the big, bad wolf,” said rest home official Lou Wilson.

The N.C. Association of Educators also began airing ads last weekend urging voters to contact lawmakers and tell them to “stop the cuts.”

Meanwhile, the conservative Citizens for a Sound Economy came to Raleigh to let lawmakers know they would be tracking votes on any tax hike proposals.

Redwine said last week that decisions about how or whether to raise additional revenue haven’t yet “bubbled up.”

Privately, lawmakers say there is more momentum for some kind of a local tax-reimbursement trade-off but the votes still aren’t there.

This much is certain – the key decisions that shape the House plan will be made soon.