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Perdue objects to income tax surcharge

Thursday, July 23, 2009
(Updated 1:52 pm)

RALEIGH (AP) — The string that tied together a $982 million tax agreement at the Legislature showed signs of fraying today when Gov. Beverly Perdue told legislative leaders she won't support an across-the-board income tax surcharge.

The 2 percent surcharge on all income tax bills was a key element in securing a compromise between House and Senate Democrats and moving toward resolution on passing a two-year budget that's 3 1/2 weeks late.

Perdue said in a news release that she talked Senate leader Marc Basnight and House Speaker Joe Hackney on Thursday and told them "I would not support a budget with an income tax increase on North Carolina's working families. I reemphasized the need to protect public schools."

Legislators earlier had considered placing the surcharge only on the highest wage earners, said House Majority Leader Hugh Holliman, D-Davidson. For example, that could be individual taxpayers making more than $150,000.

Holliman said House Democrats would meet to discuss options to try to satisfy Perdue, who would be asked to sign any budget bill into law. Senate Democrats already were meeting early Thursday afternoon.

The surcharge agreed to earlier this week would have raised $197 million this year.

"We will go back and take a look at what we can do," Holliman told reporters. "We'll have to go back to our individual caucuses and make sure we have the votes for the changes."

Perdue didn't say in the statement that she would veto the budget if it contained an income tax increase for low- and middle-class families, but Holliman said his impression was that it could happen.

Perdue spokeswoman Chrissy Pearson said it was premature to talk about a veto. "The governor feels there is still a lot of negotiating to be done before getting to that point," Pearson said.

Holliman said Perdue continues to want an additional $200 million in revenues to prevent further cuts in education, but he said that would be even more difficult.

Perdue's tax reservations comes a day after she sent out another statement that chastised lawmakers for failing to get out a budget on time, telling them "the clock is ticking."

But working out a new tax plan to satisfy Perdue could delay efforts to get a final budget to the floor by the middle of next week.

Sen. Linda Garrou, D-Forsyth, one of the Senate's chief budget negotiators, said she'd be willing to work through the weekend to work out the final differences in the budget, which would spend $18.9 billion this year.

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