RALEIGH — After several weeks of negotiation, the various sides in North Carolina’s fiscal poker game are still holding their cards and holding out for someone else to fold. The House wants the Senate to accept more budget savings, particularly in the second year of North Carolina’s 2003-05 budget biennium. The Senate wants the House to accept an additional $330 million in excise taxes — on top of the half-billion-dollar tax increase already included in both the House and Senate budgets.
Meanwhile, Gov. Mike Easley wants the two chambers to consider sliding a state lottery into the budget, or at least to have a vote on the measure right after passing a budget so as to suggest that lottery revenues could replace some of those dastardly budget cuts everyone’s so upset about.
Only, everyone’s not so upset. I don’t sense a groundswell of public support for higher revenues to protect state spending. North Carolina’s already imposed one the largest tax hikes in the country, a two-year package in 2001 and 2002 that hit families and the economy hard. As for Easley’s lottery, there just doesn’t seem to be any momentum. The idea apparently had more votes in 2002, when it lost badly in the House, than it does now. The best bet would be some kind of stealth vote, a bill materializing suddenly on the House floor when lottery opponents are either absent or unorganized. Feels too risky to me.
Easley and Senate leader Marc Basnight apparently do believe that they have the stronger political hand to play against the House. That’s why they hatched a plan to vote Thursday on a continuing resolution to extend state spending into July and to make sure that a half-cent sales-tax increase first enacted in 2001 won’t disappear like it is supposed to on June 30.
The House has already agreed to these notions in its budget plan, including the tax-hike extension. But many political observers think that House members may not be as willing to vote later in July to reimpose the expired half-penny sales tax as they are in voting to keep them in place after June 30. So by locking in the tax increases now, lawmakers can avoid additional pressure to find budget savings or raise other taxes.
Of course, this is patently absurd. There is no practical difference at all between vote for the higher taxes in June or voting for them in July. Either vote is a vote for a tax increase, and will be treated as such by political opponents and any voters inclined to dislike tax increases. Still, lots of folks are treating June 30 as some sort of major legislative deadline — actually, it is supposed to be the deadline for fashioning a new budget for the fiscal biennium beginning the next day, as if anybody cares — which is why the resolution popped into existence.
If this is a budget squeeze on the House, however, I see it as a limp-wristed one. What Easley and Basnight are essentially saying to the House is that they should “hurry up and act before consumers start keeping more of their own money.” Otherwise, they say, the state could lose “a million dollars a day” in sales-tax revenue. More to the point, though, that means that North Carolina’s cash-strapped families could save a million dollars a day if the House doesn’t act. Horrifying thought, isn’t it?
Maybe the House will fold anyway. As all three players in this game are holding nothing higher than the political equivalent of a pair of fives, it’s all about the bluff. And the House isn’t a place where it’s easy to keep a straight face.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.