Fitzsimon File

The budget and tax debate in the General Assembly went from the confusing to the bizarre Tuesday. Leaders of the Legislative Black Caucus and the State Employees Association called for legalization of video poker to help the budget crisis.

House Republican leaders knocked over cardboard boxes at a news conference to illustrate their budget position and talked about cutting programs from the budget that aren’t in it.

And Senate leaders began public deliberations on expanding the base of the state sales tax, a reasonable proposal that House leaders have repeatedly rejected, signaling a rebooting of the tax debate that could delay the adjournment of the legislative session until Labor Day.

The Senate Finance meeting comes after a tentative agreement between House and Senate leaders last week was wiped out by Governor Beverly Perdue, who was upset about the proposed income tax surcharge on all taxpayers.

House leaders want to fine tune the compromise that included a penny sales tax increase along with the surcharge, and a hike in cigarette and alcohol taxes.

Senate leaders would rather start over and Tuesday began to make the public case for the core of their original package, an expansion of the base of the sales and income taxes while lowering both rates, part of an overdue reform of the state’s antiquated tax code. 

Senator Dan Clodfelter, the mastermind of the Senate plan, told the Finance Committee that tax reform was coming next week or next month or next year whether lawmakers liked it or not.

Then committee members heard a primer on why the tax code is obsolete and needs an overhaul, complete with testimony from business leaders organized by the Emerging Issues Forum, a PowerPoint presentation from tax experts, and comments from chairs of past commissions appointed to work on tax reform.

House leaders do not seem amused. Speaker Joe Hackney told reporters Monday night that the end of July is not the time to rewrite the tax code. Clodfelter said the failure of the House to participate in the reform debate was responsible for the budget delay.

That doesn’t bode well for a final tax agreement anytime soon.

The Senate tax lesson came two hours after leaders of the Legislative Black Caucus and State Employees Association appeared with legislative supporters of the video poker industry to call for legalization of video poker, which they say could provide as much as $500 million a year in new tax revenue to reduce the need for new taxes.

Lawmakers voted almost unanimously three years ago to outlaw video poker after criminal investigations into the industry and the activities of former House Speaker Jim Black, who’s now in federal prison after pleading guilty to corruption charges.

Rep. Earl Jones repeatedly told reporters that video poker is really no different from the lottery. State Employees Association President Dana Cope called it a natural progression. It’s not like anybody needed another reason to rue the day the state got in the lottery business.

Republican legislative leaders weighed in against the video poker legislation, but spent most of their weekly attempt to remain relevant blasting the Democrats for missing the budget deadline, pushing for tax increases, and being responsible for virtually everything else that is wrong with North Carolina.

At one point, House Majority Leader Paul Stam knocked over a stack of paper bricks labeled to represent pieces of the state budget, apparently to try to show that Democrats have misplaced priorities and don’t need to raise taxes.

Stam also provided a list of budget savings he said would help avoid a tax increase, but several of the items he listed referred to the cost of the legislation that hasn’t passed.

Senate Minority Leader Phil Berger made the reasonable request that budget negotiators release the agreements they have made on what will be funded in the final budget, but otherwise Republicans are still straining to be noticed—even when they knock over painted boxes.

The real action remains between the leaders of the House and Senate and Tuesday brought more questions than answers. Why did Senate leaders wait until July 27^th to begin public hearings on their tax package? The only other public discussion came in one meeting in April.

Why are House leaders so reluctant to discuss overdue changes in the tax code that could raise revenue and make significant progress toward reform?

It’s not necessarily bad news that Governor Perdue blew up last week’s tax agreement, which took the worst and most regressive parts of both plans. 

Now it's time to start talking about the best of both, the broadening of the base and the lowering of rates in the Senate plan, and the closing of corporate tax loopholes and higher taxes on the wealthy in the House proposal.  

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This entry was posted on Tuesday, July 28th, 2009 at 2:19 pm and is filed under Fitzsimon File. You can follow any responses to this entry through the RSS 2.0 feed.