“No New Taxes”

Hundreds rallied Tuesday against a legislative proposal to raise taxes as the North Carolina budget standoff showed no sign of easing. Gov. Mike Easley also said he would reject any spending measure that does not safeguard the state’s spotless credit rating.

A colorful crowd of roughly 700 people descended upon the grassy mall behind the Legislative Building to protest a House tax bill that would net the state coffers about $ 440 million in fiscal year 2001-02. Democratic leaders hope the money can repair the budget and restock the emergency cash reserves, also called the ”rainy day fund.”

A persistently weak economy has depressed tax collections and punched holes in House and Senate budgets being used to negotiate a compromise.

Legislators, however, are deadlocked over whether the solution is raising more money or making painful cuts in government services.

”When they say they have no choice but to raise taxes, don’t you believe them,” John Hood, president of the conservative John Locke Foundation, told demonstrators. ”There is always an alternative to raising taxes.”

Members of a finance committee endorsed the tax measure last week. House Speaker Jim Black, D-Mecklenburg, said he has not yet decided whether to send the bill to the full chamber for a vote.

Black said he was still meeting with Republicans and Democrats about the taxes. Most GOP lawmakers, and even a few dissident Democrats, either oppose the measure or have not committed to supporting it.

”I’m trying to build a consensus on both sides of the aisle,” Black said.

Another option would be for the speaker to ship the tax package directly to budget negotiators. They could then put the new levies into the spending document.

Among the proposals are a1 percent income-tax hike for people earning more than $ 200,000, a 6 percent sales tax on liquor, removal of the tax cap on luxury cars and higher taxes on managed care companies.

The plan also calls for local governments to raise the sales tax a half cent, which would compensate for nearly $ 330 million in annual financial aid to cities and counties that the legislature would cut off.

In turn, the package offers taxpayers some relief. It would boost the child credit to $ 100 and raise to $ 6,000 the standard income-tax deduction for married couples.

At the rally, protesters urged legislators to quash the bill and study ways to save money.

”I think (lawmakers) need to look at the spending. There’s a lot of waste,” said Anne Carty, 77, of Winston-Salem, who held a homemade sign that read: ‘ ‘Mike Easley – You are the weakest link.”

Conservative groups such as the Locke Foundation and N.C. Citizens for a

Sound Economy teamed with radio talk-show hosts from stations across the state to put together the event.

The ”Tar Heel Tea Party” came only weeks after radio announcers in Nashville sparked a rebellious crowd to storm the Tennessee Capitol building, trying to stop lawmakers from imposing a statewide income tax. The mob of approximately 2,000 smashed windows and closed streets.

In contrast, the North Carolina rally was well behaved, although Raleigh city police and state Capitol police were on hand in case any disturbances broke out.

An ugly moment did occur inside the Legislative Building. During the House floor session, a person in the gallery began shouting and others chanted ”No new taxes.”

Outside, the crowd cheered as speakers jabbed at lawmakers for suggesting higher levies.

Among those attending were Tim and Pamala Minard, who drove up from Charlotte with their 8-year-old daughter to add their voice to the protest. The girl, Amanda, held a sign that read: ”Tax my parents more and I can’t get a puppy.”

Pamala Minard, 46, said higher taxes would not only keep her child petless, but also eat up discretionary income normally sent to charities. ”They will suffer because I won’t have any extra money,” she said.

Earlier in the day, though, Easley warned that lawmakers could do lasting damage to North Carolina unless they bring in more revenue.

A major concern among elected officials is that the budget crunch could hurt the state’s triple-A credit rating, in place for nearly four decades. It is the highest status possible and keeps interest payments low on money the state borrows.

Last month, one of the rating agencies, Moody’s Investors Service, warned of a downgrade if the legislature cannot fix the budget. It is already a month late, as the fiscal year began July 1.

Easley, seeking to reassure New York investment firms, said he ”won’t sign a budget that puts our bond rating in jeopardy.”

”This is not a partisan issue,” the Democratic governor said. ”… It is a North Carolina problem.”