Tax Proposal Snagged in 2-Week Senate Delay

On Aug. 30, the House approved by a narrow majority a tax package that would generate $391 million in tax revenue for the current fiscal year.

The House package gives local governments the ability to raise the sales tax by a half cent, create a higher tax bracket for the wealthy and provide several tax credits for the poor.

The package was far smaller than what most Democrats had pushed for earlier in the session, but House Speaker Jim Black, D-Mecklenburg, was unable to build a consensus on a larger tax package because the chamber is closely split and a small group of Democrats have taken sides with Republicans during budget debates.

The Senate received the House tax package about two weeks ago, but it has yet to be formally heard by any committee, and it's still unclear exactly what path the package will take through the Senate.

Sen. Howard Lee, D-Orange, said members from both chambers have been meeting informally to discuss the best possible course of action.

Lee said many members of the Senate still have reservations about whether the House's tax package is large enough to rectify a state budget shortfall.

Senate Democrats have called for a one-cent sales tax increase that would generate about $850 million in additional revenue.

"The House package, as it currently stands, just does not meet the needs of the state," said Lee, who chairs the Senate Appropriations Committee.

Lee said Black and Senate President Pro Tem Marc Basnight have been meeting with finance chairmen from both houses to see if a different compromise can be reached.

"We don't believe that the House package, as proposed, fits all those needs," said Basnight's spokesman, Rob Lamme.

But Lamme said it is still unclear how the tax package will be handled -- if it will go through the standard committee process, be part of a conference report or simply be written into the budget.

"I don't think it's clear what the mechanics of the legislation will be," Lamme said. "It just doesn't make sense to go through the committee process until everyone is on the same page."

Lamme added that he hopes the tax package will be passed in the next week, which could allow legislators to wrap up the budget process by the end of September.

But Lee said that if the stalemate continues and as legislators tire of spending time in Raleigh, the Senate might be willing to accept the House proposal.

Lee said, "We might be at an impasse to the point where the Senate may cave, take the House proposal and go home."

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