House, Senate spar over tax cut

06/24/2005
News & Observer
Dan Kane

State Senate and House leaders are fighting over a tax cut for the state's highest earners, and the battle could cost them $413 million in revenues both groups say they need to pay for education, health care and other services.

The $413 million comes from a temporary half-penny sales tax that is scheduled to expire June 30, the end of the fiscal year. The Senate and House leaders have introduced stopgap spending measures that would extend the tax and keep government running for another 30 days if they cannot pass a budget by then.

But the Senate wants to phase out a temporary half-percentage point tax on those high earners' income, while the House's stopgap measure would keep the increase in place another two years. It alone would bring in an additional $40 million.

The House approved its plan two weeks ago, while the Senate has scheduled the first vote on its stopgap measure for Monday, leaving little time for lawmakers to work out their differences before the end of the fiscal year.

Rep. Paul Luebke, a Durham Democrat and a Finance Committee co-chairman, said the Senate should have started the debate much sooner.

"They've chosen to ignore that only the bill we sent them could gain 61 votes in the House," Luebke said. "You could draw your own conclusions as to who's decided to play the game of chicken."

House Speaker Jim Black, a Mecklenburg County Democrat, has said that both tax increases should be extended because House Democrats think it's unfair to cut taxes for families making $200,000 or more, as the Senate has proposed, while the half-cent sales tax increase remains on the books. The sales tax is the same no matter how much people make, so it takes a bigger bite from those who make less money.

Senate leaders say cutting the income tax would make the state more attractive to businesses.

Both stopgap spending measures would freeze spending at current levels for 30 days past the start of the fiscal year if no budget is in place.

House and Senate budget writers are still attempting to get a roughly $17 billion budget out in time for a vote next week, but they were not sounding optimistic on Thursday.

"It is my hope that we finish the budget sooner than later, but we want to do a good job," said state Sen. Linda Garrou, a Winston-Salem Democrat.

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