House’s Tax Writers Choose to Resist Reductions

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.”

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Staff writer Dan Kane contributed to this report.

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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.

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Staff writer Dan Kane contributed to this report.

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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.

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