Measure WOuld Keep Sales-Tax Rate

North Carolinians would not see a promised drop in the sales tax this summer under a measure that a legislative panel approved Tuesday.

The House Finance Committee endorsed a $384 million tax package that is needed to float a $15 billion budget plan sailing to the General Assembly.

The revenue bill delays for two years a half-percent decrease in the levy on sales now planned to take effect July 1. It also keeps an 8.25 percent income-tax bracket for the wealthiest residents that had been scheduled to disappear after this year.

Democratic Gov. Mike Easley recommended these changes in his budget proposal last month. He also wanted lawmakers to postpone a pair of tax breaks – increases in the credit per child and standard income-tax deduction for married couples – but the House committee has refused.

“That will make sure we have the money to balance the budget, while at the same time providing tax relief for the working people of this state,” said state Rep. David Miner, R-Wake, a House Finance Committee chairman who sponsored the bill.

House members also are stepping away from Easley’s proposal to cut about $20 million intended to help cover money that local governments lost when the legislature stopped reimbursing them for repealed inventory taxes.

Some lawmakers wanted to jack up North Carolina’s excise tax on cigarettes to 50 percent per pack. That bill got an airing in the finance committee, but it was pulled without a vote after facing hostile reaction.

Proponents offered the hike as a way not only to raise revenue during a tight economy but also to erode the number of people – particularly teenagers – who take up the unhealthy habit. They cited statistics that show smoking declines when the cigarette price goes up.

“We want to do something to protect our children,” said Peg O’Connell of N.C. Alliance for Health.

Legislatures across the nation have turned to stiffer taxes on cigarettes to bridge gapping budget deficits.

While a politically safe move elsewhere, it has little traction in tobacco-dependent North Carolina. The state charges a 5 cent tax per pack, and only Virginia and Kentucky impose lower levies.

Business interests and many lawmakers were scornful of an effort to target a homegrown industry that provides many well-paying jobs.

Roger Bone, a lobbyist for Greensboro-based Lorillard Tobacco Co., said teenagers likely would shift to cheaper brands if the state imposed a higher levy, undercutting any effort to reduce youth smoking.

A larger tax also could hurt the sale of cigarettes to tourists who stop in North Carolina for the less-costly smokes, said Rep. Bill Daughtridge Jr., R-Nash. He said that bargain attracts people to pull off the highway and spend money, much like they do to buy fireworks in South Carolina and oranges in Florida.

“We have to have a reason for them to stop,” Daughtridge said.

Meanwhile, about 250 members of an anti-tax group gathered for a rally outside the Legislative Building.

Jonathan Hill, state director of Citizens for a Sound Economy, told the crowd that lawmakers are again hitting up the people to address their fiscal irresponsibility.

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