Keep or kill the 'temporary' taxes?

To no one’s surprise, the N.C. House budget proposal moving to the floor this week retains two “temporary” tax increases adopted in 2001 to help the state meet pressing needs during a revenue shortfall. Gov. Easley proposed and the legislature approved a half-cent sales tax increase and a hike in the top income-tax rate for the highest earners. Those taxes were twice extended, but last year the legislature began to phase them out – cutting the increases in half and slating the rest to expire this year.
But late last fall Gov. Easley said he believed a better way to get money to those who needed it the most was to use income from the “temporary” taxes to help the state’s lowest income citizens. He didn’t propose an earned income tax credit, as some had recommended, but did propose a way to exempt the lowest income taxpayers from having any tax liability.
The House bill opts for an earned income credit for the lowest wage earners, beginning in 2008. To pay for it and other programs, including a state credit for those who adopt children, the top income tax rate would remain at 8 percent and the sales tax rate at 6.75 percent. The Associated Press quoted Rep. Paul Luebke, D-Durham and cochair of the House Finance Committee, as saying that “there’s no way to meet the educational and health care needs of the state” without retaining the taxes.
Whether the Senate will go along with another extension of the temporary taxes is still up in the air, but Senate leaders would prefer to continue the promised phase-out. They’ll get their chance to change the budget perhaps next week, if the House debates and approves its proposal this week.
Perhaps it’s true there’s no way to meet all the needs of the state without keeping the “temporary” taxes. But the public is going to be mighty skeptical when the House budget also includes money for local projects – often derided as “pork barrel” – to fund such things as a drag racing museum and other items that would be hard to define as pressing state needs. But Democrats may not understand that.
What do you think? Is it worth keeping the “temporary” taxes to provide targeted tax relief to low-income citizens and provide a tax credit for families that adopt children? Are these worthwhile public goals? Do you accept Democrats’ contention that a $20.3 billion budget covers essential needs? What would you be willing to cut to free up the $300 million the “temporary” taxes would produce?