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Advocates say tax increase preferable to cuts in services

by SCOTT MOONEYHAM on 5/23/01.

Diana Hertz says lawmakers should think hard before cutting the budgets of state agencies that serve the poor and disabled.

A single mother of a 5-year-old son, Hertz says she would be on welfare instead of making $26,000 a year as an office manager if it weren't for state and federal child care subsidies.

Hertz was among about 500 people at the Legislature on Wednesday calling for lawmakers to raise taxes rather than cut services. Nearly 200 groups, from the state branch of the American Association of Retired People to the North Carolina Association of Educators, were represented.

"I really don't have any money, but I can afford a tax increase if it could keep someone, a neighbor, off of welfare," Hertz said.

Looking around a cramped room, Hertz said she was lucky. Others attending the rally, some of them in wheelchairs, face the prospect of institutionalized care if some of the proposed cuts are approved.

"I worked myself just about to death, and I made it. I kept us out of subsidized housing. I kept us off food stamps," Hertz said. "I just want the legislators to understand what these programs mean to people."

That theme - that budget cuts will not only hurt individuals but hurt the state's long-term financial future - was repeated by speaker after speaker.

The advocates' push to avoid budget cuts comes just days before Senate budget writers are expected to complete a proposed budget. With the state facing the worst budget crisis in a decade, the $14 billion spending plan is expected to include hundreds of millions of dollars in cuts to education, health care and other services provide by state government.

"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, chair of the Covenant with North Carolina's Children, which organized the rally. "But we say to you that it is not acceptable to plug the budget hole by decimating services to the most vulnerable North Carolinians."

Organizers said many budget cuts could be avoided if lawmakers were willing to approve targeted sales tax increases, loophole closings and begin taxing services.

In all, the group called for $380 million in tax increases.

Dan Gerlach, director of the N.C. Budget and Tax Center, said taxing services provided by lawyers, accountants and similar professions could raise $200 million.

"Our tax system is broken and needs to be fixed," Gerlach said, referring to the taxation of goods in an economy that is increasingly service-based.

But Gerlach said the key message was that taxes need to be increased and services protected.

"How we get there is up for discussion," he said.

House and Senate leaders have said they plan to avoid any broad tax increases. However, the Senate budget plan is expected to include around $200 million in sales tax increases targeted at specific items and corporate tax loophole closings.

Rep. David Redwine, D-Brunswick, co-chair of the House budget-writing committee, said Wednesday's rally didn't go unnoticed.

"I think members of the General Assembly pay attention to the wishes of their constituents. I don't know whether it changed any individual minds," Redwine said.

In the state House, 61 of the 120 lawmakers have signed a pledge not to increase taxes. Eighteen of the 50 senators signed the pledge.

Jonathan Hill is head of the state chapter of the Citizens for a Sound
Economy, which circulated the no-tax pledge. He said he plans to keep score on whether lawmakers keep their promise.

"We believe the taxpayers of North Carolina are paying enough taxes - period. And we don't believe there should be any tax increases," Hill said.