YADKINVILLE, N.C. — A state representative said yesterday that he intends to pay his back taxes in September, but the amount should be lower than the $88,874 that federal and state tax officials indicated that he owed last year.

Rep. Darrell McCormick, R-Yadkin, said he is waiting for tax officials to send him a final bill for the back taxes. He said he hopes he can pay his taxes within two weeks.

McCormick owns a commercial real-estate and investment company in Winston-Salem. According to court records, the state of North Carolina filed a certificate of tax liability against McCormick for $17,850 in October 2008.

The Internal Revenue Service filed a federal tax lien against him for $71,024 in December 2008. The taxes cover 2004 and 2007.

McCormick told the Winston-Salem Journal in January that he didn’t pay his taxes because of a clerical error involving a mix-up over his gross pay and his take-home pay. He is self-employed and has a bookkeeper that helps prepare his taxes.

“It is an accounting mess,” McCormick said. “They were coming in with numbers that were higher than ours.”

McCormick said that there was a nearly $4,000 overpayment for his 2003 state taxes that wasn’t applied to his 2004 taxes. He and his accountant have worked with state and federal tax officials to resolve the discrepancy.

McCormick said he owes less than the $71,024 that the IRS says he owes, but he didn’t know the exact amount. In January, he said he would pay his taxes.

“I felt that the number was too high,” McCormick said. “I wasn’t going to pay it until I got it lowered.”

He found the mistakes in the 2004 taxes and reported the problem to tax officials in August 2008.
“I thought it would be settled up in one meeting,” McCormick said. “It was more complicated than I thought, too.”

State Rep. Paul Stam, R-Wake, and the House minority leader, said that McCormick has not done anything illegal or unethical in not paying the back taxes. Stam said that it is normal for taxpayers to take months to sort out disagreements with state and federal tax officials over back taxes.

However, taxpayers can pay their tax bills online to the N.C. Department of Revenue and IRS, according to those agencies’ Web sites.

Bill Holmes, the spokesman for the Rep. Joe Hackney, the speaker of the N.C. House, said that Hackney has not made any public comment about McCormick’s back taxes.

“The people of the (92nd) district knew about those issues when Rep. McCormick was running for election, and they chose to elect him,” Holmes said.

McCormick defeated Democrat Rick Marshall with 63 percent of the vote to win the House seat. McCormick was elected in a historically Republican district that includes Yadkin and parts of Surry and Iredell counties.

He succeeded Republican Rep. George Holmes, who retired after 16 years in the General Assembly.

McCormick said he will run for re-election in the November 2010, and he realizes any political opponent may use his unpaid taxes against him.

“They are going to use anything they can,” McCormick said.

Highlights of the 2009-10 state budget, the first year of a two-year spending blueprint North Carolina legislators were scheduled to vote on Tuesday and Wednesday:
TAXES
- Increase sales tax rate by one penny through July 2011. $803
million
- New surtax on state taxes paid by individual taxpayers for tax
years 2009 and 2010. $172 million
- Create temporary corporate income tax surtax. $23.1 million.
- Higher cigarette and alcohol excise taxes. $68.8 million

SCHOOLS
- Cut to public schools. The State Board of Education shall
apportion the cut among 115 school districts based on enrollment.
$225 million.
- Reduced funding for school bus maintenance and salaries. $15
milliion.
- Increase dropout prevention grants. $13 million.
- Reduce funding for More at Four, which provites free preschool
for at-risk 4-year-olds. $5 million.
- Fund 8 percent increase in community college enrollment. $58
million.
- Meet projected enrollment growth at University of North
Carolina system campuses. $44.2 million

HUMAN SERVICES
- Reduce funding for Smart Start early childhood program. $16
million.
- Cut AIDS drug assistance program. $3 million.
- Provide grant to six regional food banks. $1 million.
- State takes over the last of county obligations for Medicaid
cost-sharing. $253 million.
- Increase allowance for projected Medicaid growth. $155
million.
- Cut Medicaid rates paid to doctors and other healthcare
providers. $76 million.

RALEIGH, N.C. – Democrats in the General Assembly could soon reach an agreement on raising taxes so lawmakers can pass North Carolina’s budget and eventually adjourn for the year.

House and Senate Democrats planned to meet separately Wednesday to talk about an agreement in principle on how to raise an extra $1 billion next year. They say new revenues are needed to narrow a budget gap caused by poor tax collections.

The deal would raise the sales tax by up to a penny and place a surcharge on income tax bills for two years. Taxes on cigarettes and alcohol also would go up.

The two chambers had been at odds for weeks over how to raise taxes. It’s the key obstacle to getting a permanent budget approved and sent to Gov. Beverly Perdue.

RALEIGH, N.C.  – Gov. Beverly Perdue says as much as $1.5 billion in new taxes are needed next year to protect public education and other services, lawmakers confirmed Wednesday.

The amount, hundreds of millions of dollars more than legislative leaders have formally offered or approved, will be a tall order given that several Democrats aren’t comfortable with tax increases and Republicans are likely to oppose them.

Also Wednesday, Perdue spoke to school teachers and other education advocates, the first of several rallies over the next week statewide as House and Senate negotiators began working out a final spending plan for state government.

Although sympathizing with lawmakers for narrowing a budget gap calculated by Democrats at more than $4.5 billion for next year, Perdue said public education cuts offered by the Senate or House would prevent students and the state from succeeding.

“The General Assembly has to protect education fundamentally. That’s the message I’m having today,” Perdue told more than 200 people inside the House chamber in the old Capitol building. “We cannot increase class size. We cannot lay off teachers. We will not sacrifice North Carolina’s economic future.”

The governor said lawmakers must raise revenues to remove the more onerous cuts, which would cut funding for several thousand teachers and teacher assistants.

Perdue said to reporters afterward: “I can’t tell you what absolute maximum or minimum is.”

But in meetings Tuesday with legislative leaders, Perdue said she was seeking between $1 billion and $1.5 billion in new revenues, according to two lawmakers who were at the meetings.

The House budget approved last weekend raised $784 million in taxes.

House Majority Leader Hugh Holliman, D-Davidson, who confirmed the governor’s revenue range, said it would be difficult to assemble enough votes to pass a final spending plan with more taxes.

“I know kind of where the votes are and I’m not sure how we’re going to get there,” Holliman said.

The Senate is now looking at a $950 million package that would expand the number of services subject to sales tax and remove income tax deductions while lowering tax rates overall, Sen. David Hoyle, D-Gaston, a finance negotiator, who also confirmed Perdue’s request.

“This is not going to be easy,” Hoyle said. “Everybody’s got to take a little bit of this pain and if we can spread it around upon all the people, it won’t be anything so painful that we can’t handle.”

When asked later about the $1.5 billion figure, Perdue spokeswoman Chrissy Pearson said in an e-mail that “the governor told legislators this morning that we need additional revenue to protect the classroom, beyond what has been proposed so far.”

Perdue scheduled another budget rally Wednesday afternoon at a Greensboro high school, with others to follow in Charlotte and Asheville on Thursday and early next week in Greenville.

Perdue said she was concerned particularly about House and Senate provisions that would raise the average class size in the public schools by two students starting next fall. The House version would eliminate funding for some 3,400 teachers in grades four through 12 and eliminate all teacher assistants in third grade. The combined savings would be more than $310 million.

Holliman said Perdue also told Democratic legislators that she wanted more money for the state’s mental health programs.

Perdue will be asked to sign the final budget bill into law. Legislators and Perdue would like to see an agreement reached before the new fiscal year begins July 1.

“I’m not threatening a veto,” Perdue said. “Right now is the time to come together and try to come to conseneus for the people of North Carolina.”

RALEIGH, N.C. – Several hundred advocates and social service providers tried to maintain the momentum Monday for raising taxes to ease severe spending cuts, holding a rally and lobbying legislators as final budget negotiations are soon to begin.

“What do we want? We want a budget that works for the whole of the people like our constitution says,” the Rev. William Barber, president of the state chapter of the National Association for the Advancement of Colored People, said at the meeting. “We want a budget that works to life up the left out, that works to make our tomorrow better than our today.”

The gathering of two coalitions representing more than 160 groups occurred outside the Legislative Building less than two hours before the Senate unanimously rejected the House’s $18.6 billion spending plan approved over the weekend. Together NC, one of the two coalitions, held a similar event two weeks ago.

Monday night’s vote largely was a formality and allows lawmakers to form a conference committee to work out differences between their competing plans. The Senate, which named its negotiators, approved its two-year budget proposal in April, before lawmakers found out that dwindling tax collections required the House to dig deeper.

Both House and Senate Democrats have suggested raising additional taxes that are needed to close a budget gap of more than $4 billion.

The House budget approved early Saturday would raise another $784 million through both sales and income tax increases and new taxes on warranties, repairs and digital downloads. The Senate has offered a standalone plan that would raise $550 million next year.

Some member groups and several Democratic lawmakers say neither amount is enough to ease the pain for services. Republican lawmakers argue that the taxes aren’t necessary to create a budget that covers the state’s most important programs.

Tracy Harrington, a self-described Republican and speech pathologist from Winterville, told the crowd she’s still worried about Medicaid cuts that could reduce programs she provides to young people. Harrington said she wants to help make North Carolina a better place.

“I want to do my part. I don’t believe my part is to have my job and the services that we provide to the children of North Carolina eliminated,” Harrington told the crowd.

The two chambers are aiming to finish their work before the new fiscal year begins July 1, but that’s unlikely.

Sen. Linda Garrou, D-Forsyth, one of the Senate’s chief negotiators, said she hopes to soon have a dollar amount that’s she believes is needed “to protect the institutions, families, and children” in North Carolina. That amount will allow Democratic finance leaders to come up with a revenue package based on that need.

RALEIGH, N.C.  – Several hundred advocates and social service providers are trying to maintain the momentum for raising taxes at the North Carolina Legislature.

Two coalitions held what they called a “state of emergency” rally Monday evening across from the Legislative Building. The speakers urged lawmakers to avoid deep cuts to narrow a budget gap of more than $4 billion.

The state House over the weekend approved its version of the state budget with $784 million in additional taxes. Some member groups say that’s not enough.

Tracy Harrington is a speech pathologist in Pitt County who spoke at the rally. She’s worried she could lose her job and her patients could be harmed if some Medicaid cuts are made.

The House and Senate now must work out a final plan.

RALEIGH, N.C. – If House Democrats agree this week to raise taxes to help narrow North Carolina’s $4 billion-plus budget gap, don’t expect unconventional ideas floating in the Legislature to generate revenues, like legalizing video poker again or Sunday liquor sales.

And neither a $1-per-pack increase in the cigarette tax sought by Gov. Beverly Perdue nor reform of the tax system being proposed by Senate Democrats has yet to receive strong support by House members.

So House leaders may have to rely on old standbys – raising sales taxes or income taxes, or both – if they want mitigate some of the proposed cuts that could eliminate more than 10,000 positions in the schools and some government-paid health services.

That’s because the two taxes comprise more than 80 percent of North Carolina’s revenue base and can generate large amounts very quickly because nearly everyone pays them. They also may be the best options on which to find a final compromise with the Senate this summer.

Democrats increased those tax rates during the recessions of 1991 and 2001. This year, sales and income tax collections have dropped dramatically. Legislative analysts say it may be 2014 before state revenues return to their high-water mark at current rates.

“You’ve got to go where the money flows, and the money flows though sales tax and the income taxes primarily,” said former Rep. George Miller, a Democratic co-chairman of the House Finance Committee in the 1990s.

For example, a halfpenny increase on the sales tax – most consumers would pay 7.25 percent instead of 6.75 percent – would increase revenues more than $400 million annually. A half-percent increase in the top individual income tax rate – from 7.75 percent to 8.25 percent – would raise up to $140 million.

Add several smaller tax and fee increases and it may negate some of the cuts that have raised ire among health care providers and public education boosters.

“Before the General Assembly takes a giant step backwards, we urge them to strike a balance between cost-cutting and appropriately increasing tax revenues to get us through this recession,” said Debra Horton, president of the North Carolina PTA, representing a coalition of public school advocates.

House Democrats haven’t agreed on a tax plan. With or without such a proposal, the House is set to vote on its state government budget for the next two years by the end of the week.

“It’s going to take an extraordinary amount of taxes to make any kind of a dent in the reductions we’ve made,” Rep. Mickey Michaux, D-Durham, senior co-chairman of the House Appropriations Committee, said late last week. Michaux said that amount may be more than $1 billion.

Republicans say prioritizing spending would ease the more onerous cuts without additional taxes. An anti-tax rally was assembled by conservative groups for the day after the Together NC rally.

“The reason that we’re in a recession is that people don’t have money. And every economist I know says the worst time to raise tax rates is when you’re in recession,” said House Minority Leader Paul Stam, R-Wake.

Approving new sales and income taxes again in 2009 would be rife with political land mines for Democrats they must try to avoid inside and outside the Legislative Building.

Only look at 2001 to see the political toll it may take.

House and Senate Democrats fought for months over whether to
approve a sales tax increase alone, or to couple it with an income tax increase on the highest wage earners so the burden wouldn’t fall disproportionately on the poor. The House won by getting both, but only after the intraparty standoff caused hard feelings between the two chambers.

A faction of House Democrats, which included Michaux, essentially held up negotiations, fanning the flames of a feud with then-House Speaker Jim Black.

Republicans also jumped on the taxes, which were labeled “temporary” and set to expire in 2003. But the taxes were extended, giving Republicans an easy target on which to campaign in legislative elections.

This year, Sen. David Hoyle, D-Gaston, a finance committee co-chairmen, said he would prefer the Senate’s proposed overhaul to North Carolina’s income and sales tax system get approved in some form.

It would reduce tax rates, expand sales taxes to include more activities and close corporate loopholes while generating $500 million more next year. But Hoyle said legislators may have to consider raising the sales tax to alleviate the deepest cuts.

“We’ve got to have money fast,” he said.

Rep. Paul Luebke, D-Durham, Hoyle’s finance counterpart in the House, said taxing services are receiving some discussion among House Democrats.

He wouldn’t say whether House Democrats are looking at raising sales or income taxes. But he said those taxes getting attention are the same that have been raised or lowered in recent years.

“Generally, the options considered have been there for a long time,” he said.

RALEIGH, N.C. – Winning the lottery in North Carolina can mean no payout if the winner owes the state back taxes, student loans or child support.

The News & Observer of Raleigh reported Tuesday that the state has collected $1.3 million in overdue payments from lottery winners since the first ticket was sold in 2006.

Some winners also have had to repay hospital debts. State law requires that officials check winners to see if they have such debts.

Lottery spokeswoman Alice Garland says some winners are happy the money will repay such debts, including a man who hit a $100,000 prize and paid some for back child support.

One man who won a $35,000 prize left the lottery office with nothing after taxes and debt payments were deducted.

The Bleecker Olds Buick GMC dealership paid property taxes for 2003, 2004 and 2005 on the SUV that the campaign of Gov. Mike Easley says it was using then, the N&O reports.