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RALEIGH — The state’s wealthiest residents would pay more income taxes and all of us would pay more sales tax under an approximately $940 million revenue proposal House members will consider today.

North Carolina has at least a $4 billion gap between the money it would raise without increasing taxes and the money it would need to continue the state budget as it is.

So far, House members have tried to bridge that gap by cutting spending in public schools, universities, health and human service programs and virtually every other aspect of state government. Some of those cuts have caused an outcry by those who rely on government services to be reduced or cut out entirely.

Democrats, who control the House, met behind closed doors Monday. In that meeting, some demanded the state raise some taxes to blunt the effect of cuts they said went too deep.

“We’re devastating people,” said Rep. Alma Adams, a Greensboro Democrat and one of the chief budget writers in the chamber. She and other budget writers say they have identified some spending items that would be restored if the full House were to agree to increasing taxes.

Examples of those restorations:

* Keeping class sizes in kindergarten through the third grades at current levels rather than increasing the number of students in a classroom.

* Keeping some mental health programs slated to be cut.

* Maintaining the amount paid to those who provide medical services to Medicaid patients.

But some Democrats are uncomfortable with raising taxes as the economy struggles to recover from recession. And almost to a person, Republicans are outspoken in their opposition to any new taxes.

“In a recession, this is not the time to be raising taxes on people who are hanging on by their fingernails trying to figure out how to put food on the table,” said Rep. Laura Wiley, a High Point Republican.

Gov. Bev Perdue and the Senate have already offered their versions of the budget that will take effect July 1. But those plans were written before results came in from April 15 tax collections, which showed that the economy was worse than expected. That left the House to propose the largest cuts and now to offer the first broad-based tax increases.

Among the major proposals outlined by budget writers Monday night:

* The sales tax would rise one-quarter of a percent. That would make it 7 percent in most places.

* Sales tax would be applied to more items, including warranties, installation of home appliances and repairs.

* Two new income tax brackets would be created. Currently, anyone making more than $100,000 is taxed at 7.75 percent. The proposal would tax those who earn between $200,000 and $500,000 at 8.25 percent. Those making more than $500,000 would be taxed at 8.5 percent.

* Cigarette taxes would be raised 25 cents to a total of 60 cents of state taxes per pack.

* Alcohol taxes and fees on dozens of government licenses and services would rise.

“It’s fair to say this revenue package has something just about every member (of the Democratic Caucus) likes to an extent and dislikes to an extent,” said Rep. Paul Luebke, a Durham Democrat and Finance Committee chairman.

Once the House finishes its work on the budget this week, a final compromise with the Senate and Perdue will be crafted.

Monday afternoon, Perdue urged legislators to consider tax increases rather than to achieve a balanced budget through cuts alone.

“With North Carolina facing an unprecedented budget shortfall, I call on House members to utilize a combination of spending reductions and new revenue in their budget,” Perdue said.
 

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com