NC Taxpayers Cry Foul Over Budget Tactics

Published August 1, 2005

Tax watchdog groups are denouncing how North Carolina’s House passed a massive new tax increase in the 2005-2007 budget.

House members in June passed a $17.1 billion budget that hikes taxes $290 million. It was pushed through the state House of Representatives by the Democratic leadership on a near-party line vote in the middle of the night. The measure has gone to conference committee, where at press time lawmakers from the House and Senate are hammering out differences between two tax hike bills.

FreedomWorks, a taxpayer organization in North Carolina, is criticizing the unusual methods that were used to win passage.

The organization, led by former U.S. House Majority Leader Dick Armey, opposed the budget as soon as it became clear that passage would result in several tax hikes, including increases on drivers’ licenses, vehicles, health care, tombstones, cell phones, satellite television, and movie tickets.

Cigarette Tax Soars

The group particularly opposed the 500 percent increase in cigarette taxes, from 5 cents to 25 cents a pack.

“We taxed the citizens from birth to the grave by putting a new fee on childhood screenings and a new tax on tombstones and caskets,” said State Rep. Mitch Gillespie (R-McDowell).

FreedomWorks and other tax watchdog groups began to criticize the House leadership when it separated the main budget resolution from a funding package that would extend the current “temporary” sales tax and higher marginal income tax for two years, provisions that were unpopular with Republicans. House Speaker Jim Black (D-Mecklenburg) admitted the move was intended to get Republicans to support the additional taxes in the budget resolution.

According to the Winston-Salem Journal on June 10, Black commented, “Hopefully, some Republicans can vote for the budget. It should make it easier for them.”

Committee Stops Debate

Opposition to the House leadership’s tactics escalated when Black stacked the Finance Committee with six pro-tax legislators on June 14. The committee stopped all debate on the measure, drawing protests from FreedomWorks and anti-tax legislators. “I’ve been here 12 years and I’ve seen some shenanigans, but this is the worst shenanigans I’ve ever seen,” State Rep. Joe Kiser (R-Lincoln) told the Winston-Salem Journal on June 15.

A constitutional requirement in North Carolina forces the House to approve different budget bills on separate days, giving citizens and groups a chance to express their concerns. The House leadership held two votes in the middle of the night in order to circumvent the spirit of this requirement.

The only Democrat member of the House to vote against the tax bill was State Rep. Bill Faison (D-Orange), who promised voters he would not raise cigarette taxes. Faison won praise from FreedomWorks and other anti-tax groups for resisting pressure from leadership and honoring his pledge to the voters of his district. According to the Durham Herald Sun on June 20, Faison told reporters, “You can’t just go around, look people in the eye, tell them you’re going to do one thing, and then do another.”

Campaign Against Damaging Taxes

Although the tax hikes passed both houses of the state legislature, taxpayer organizations hope to defeat the budget in conference committee. FreedomWorks, the John Locke Foundation, and other groups have engaged in an education campaign to educate citizens on the damage higher taxes would do to North Carolina’s economy.

FreedomWorks State Director Allen Page remarked, “These tax increases are such bad policy that it’s no wonder the legislature chose to pass them quickly, without much debate, and in the wee hours of the morning.”

Businesses also have entered the fray. R. J. Reynolds, a major cigarette manufacturer in the state, criticized Gov. Mike Easley (D) for supporting the hike. The Greensboro News and Record reported on April 11 that Reynolds executive Brennan Dawson commented, “To single out smokers to bear the burden of a budget deficit is simply preposterous.”

No Longer Lowest Rates

State Rep. Jim Crawford (D-Granville) defends the proposed tax hike. He told the Associated Press for a June 16 article, the budget bill “doesn’t raise any dollars that we don’t desperately need.”

Groups including the John Locke Foundation disagree, noting the $17.1 billion budget increases total spending by 7 percent. The North Carolina think tank produced an alternative budget that would reduce state spending.

According to the group’s Web site, analyst Joseph Coletti contended, “North Carolina’s recent string of budget deficits is the result of poor spending policies, not inadequate revenues or forces beyond our control.”

Michael Shiba ([email protected]) is public affairs coordinator at FreedomWorks.