Tax agreement could come today

After more than a month of strained negotiations about how to raise money to offset a gigantic state budget deficit, lawmakers saw a third path Tuesday morning: Raise the tax burden on everybody.

The Senate put forth a plan that takes pieces of both the House and Senate proposals without giving either chamber what it really wanted.

The proposal calls for increases in sales taxes and sin taxes, as well as a two-year surcharge on corporate and individual income taxes for all taxpayers, to raise $990 million. It would put the total budget for this fiscal year at about $18.9 billion.

Supporters of the plan say it will raise the revenue Democratic lawmakers say the state needs to prevent dramatic cuts to education, public safety and health services.

"Nobody wants any more taxes, but they also don't want cuts on services," Sen. David Hoyle, a Gastonia Democrat involved in budget negotiations. "People don't realize the state is in an economic crisis."

The plan is sure to anger many state residents, who will face up to an extra dollar in sales tax for every $100 they spend shopping.

"This is always the case in government," said Jon Blum of Angier, who bought more than $130 worth of household items at the Super Target in Cary. "They need to learn to do more with less, just like we're having to do."

House and Senate Democrats are expected to discuss the tax proposal in closed sessions today. Even if members agree, negotiators still have to work out which state programs will be cut. House Speaker Joe Hackney said an agreement could be final within a day or two.

"We think it's time to get an agreement and finish this off," Hackney said.

Tax plan details after the jump. (N&O)

—————

* Sales tax: Either increase by three-quarters of a cent and increase taxes on electricity and natural gas or increase the sales tax by 1 cent without the increases in utility taxes.

* Sin taxes: The cigarette tax would increase by 10 to 15 cents per pack. Lawmakers are not saying yet how much they would increase the taxes on alcohol.

* Income tax: A 2 percent surcharge on personal and corporate income tax liability for all taxpayers. The surcharge would expire in two years.

* Digital purchases: Would levy sales tax on digital products such as ringtones and downloads. Would also require online retailers to withhold sales tax if the retailer pays a commission to North Carolina-based Web sites that refer buyers.