N.C. House Passes Plan to Raise Taxes

Before the plan passes, the Senate says it must protect working families, education, and state residents' futures.

The N.C. House passed a tax plan Thursday morning that brought members one step closer to crafting a state budget and ending months of deadlock.

The tax plan would give local governments the ability to raise the sales tax by a half of a cent, create a higher tax bracket for the wealthy and use other methods to generate an estimated $391 million in additional tax revenue.

The extra funds will help ease a multi-million dollar budget shortfall.

Democrats and Republicans voted largely along party lines, approving the plan 63-56. Only one Republican voted for the plan.

The bill is expected to reach the N.C. Senate Finance Committee by Wednesday. The committee can accept the proposal or offer additional changes.

The tax plan gives individual counties the ability to raise their sales taxes in exchange for halting $330 million in local reimbursements that will no longer be given to the counties.

Under the plan, married couples will receive some tax relief in the form of an increased standard income deduction and an increased child credit.

By passing the tax plan, the House finally took the first step towards ending a budget deadlock that has been going on since July.

Danny Lineberry, spokesman for House Speaker Jim Black, said compromise was the key to passing the tax plan.

"It was just a part of putting all the pieces together to form a majority vote," he said. "It wasn't just one item -- it was a combination of things."

Lineberry added that one of the challenges of passing the tax plan through the House was disagreement about the amount of the sales tax increase.

Senate leaders originally wanted a 1-cent increase. Many representatives agreed, but voting was held up by a faction of the Democratic Party called the Group of Eight, led by Rep. Dan Blue, D-Wake, who wanted the proposed sales tax decreased.

"Seven or eight members said they would come closer to voting for it if we took the half-cent out," Lineberry said.

House Minority Leader Leo Daughtry, R-Johnston, said the bill passed because the Group of Eight only agreed to vote for the bill once the sales tax increase was limited to the half-cent local option tax. "The Democratic Party was able to get their dissidents back in line," Daughtry said.

He added that he did not think the bill would pass the Senate. "They don't have enough money in the package to suit the Senate," he said.

Rob Lamme, spokesman for Senate President Pro Tem Marc Basnight, said the Senate has three priorities to consider before passing the plan.

Lamme said senators will make sure the plan is fair for working families, provides sufficient revenue to protect education and assures state residents a secure future.

"The last thing anyone wants is another budget crisis," he said.

Lamme added that the Senate likely will revive the earned-income package, which provides low-income workers with a tax break. "We'll try to come up with a package that is fair to North Carolinians and will pass both chambers."

The State & National Editor can be reached at stntdesk@unc.edu.