Budget Standoff Continues

It has now (24 Aug 98) been more than three weeks since the House and Senate appointed a conference committee to work out the differences between the two budgets and this week the negotiations took a step backwards as Republican House Speaker Harold Brubaker released a statement blasting the Senate for not agreeing to a repeal of the inheritance tax and calling on the Senate to "abandon their foolish, liberal, reckless spending."

The spending differences boil down to fully funding Smart Start, boosting funding for universities and community colleges, and cleaning up the environment

It is not clear which of these Senate priorities Brubaker considers foolish and reckless—protecting the environment, helping children or funding higher education. Maybe he opposes all three.

The two sides had been making progress in the couple of weeks resolving the differences in the tax cut proposals. The House is drawing a line in the sand over the inheritance tax, the tax that benefits the wealthy more than other tax in its package. The North Carolina Budget and Tax Center report on the inheritance tax found that in a recent year, more than 64,000 people died in North Carolina and tax claims were made on slightly more than 5,000 of the estates.

Senate President Pro Tem Marc Basnight released a statement of his own this week, pointing out that the House was unwilling to meet the critical needs of the state and instead was demanding a tax cut for just 5,000 people.

That's what the first round of budget talks have been reduced to a tax break for a handful of citizens or funding for vital state programs. Even when this impasse is settled, there are still weeks worth of differences for the two sides to resolve. The sides have widely different views on other key issues addresses in the budget, issues like welfare reform and charter schools.

Budget subcommittees could be already at work trying to resolve those disputes while the tax question is debated, as Rep. Paul Luebke pointed out on the House floor this week, but the House leaders refuse to discuss any other specific items so the session drags on as Labor Day approaches.

The House leadership clearly is insisting on the inheritance tax cut with November's election most prominent in their minds. They refer to the inheritance tax rhetorically as the death tax and they claim that all they want to do is allow small farmers to leave their children the fruit of their life's labor.

They claim this even thought the facts do not support it. They also neglect to point out that North Carolina has cut taxes more in recent years than every state in the country except Arizona and the bulk of that tax relief has benefited those at the upper ends of the economic ladder.

The Senate also raises legitimate questions about fiscal responsibility about the House budget plan and what it will mean for state revenues in the next few years. This week state employees pointed out that the House budget projections are based on only a two percent pay hike for state workers in next few years. Senators have pointed out the House financial model allows for no increases for Smart Start and other important programs.