Budget Negotiations

House and Senate budget negotiators reached an important deal on targeted tax cuts late Thursday as they pushed toward resolving final differences on a $21.3 billion state spending plan. House Majority Leader Hugh Holliman, D-Davidson, said differences remain on education and capital projects, but that negotiators planned to work well into Thursday night to try to resolve them. Holliman predicted that a final budget deal would be struck soon, with House and Senate votes on the plan by the middle of next week. Sen. David Hoyle, D-Gaston, co-chair of the Senate Finance Committee, was less optimistic.
The negotiations took place amid news that an expected $151 million budget surplus for the current year would be nearly cut in half. Besides $70 million less in one-time money, which would accrue to state reserves, the drop in revenues means $45 million less in recurring money of the upcoming fiscal year, according to the State Budget Office. Gov. Mike Easley wrote to legislators that he understood that the news would make balancing the budget a more difficult task. Legislators, though, didn't seem fazed. Budget negotiators agreed to a tax-cut package that will include expansion of an Earned Income Tax Credit for poor families, a property tax break for disabled veterans, extension of a small business health insurance tax credit, elimination of the state gift tax and tax relief for some small businesses who owe uncollected sales taxes.
The EITC would be expanded from 3.5 percent to 4.5 percent of the value of the federal tax credit for this year, rising to 5 percent in the following year. The tax breaks were expected to total around $50 million. Hoyle was insistent that the tax relief for bakers, cabinet makers and interior designers -- who say they were caught in changing sales tax definitions -- be in a final deal. "These people without exception tried to comply with the law," Hoyle said. Not included in the deal was a Senate proposal to provide a tax cut for those using home heating oil. (THE INSIDER, 6/27/08).