RALEIGH - All that appears to be preventing an agreement among House and Senate Democrats on taxes for the state budget and a plan to help counties with their Medicaid bills is a .4 percent land transfer tax.

House Democrats want it as part of a deal to help counties with their Medicaid bills. But Senate Democrats balked after meeting behind closed doors for two hours with lobbyists for the homebuilding and real estate businesses camped outside. Senate leaders would only say they had no deal late this afternoon.

"No decision is sometimes a victory," said Paul Wilms, a lobbyist for the N.C. Home Builders Association.

Budget wise, House leaders say here's what has been agreed to:

-- a quarter-penny temporary sales tax will stay on the books permanently. It is scheduled to expire on Sunday, though a stopgap spending bill that has cleared the House and tentatively passed the Senate would extend it another month.

-- a quarter-percentage point temporary income tax on high earners will come off as scheduled on Jan. 1.

-- the working poor would receive an earned income tax credit that splits the difference between House and Senate proposals and would cost roughly $45 million. It would allow some recipients to get back in credits more than what they paid in income taxes, but would not let them receive more than their total tax liability.

Here are some of the details of the Medicaid plan:

-- it would be phased in over the next three years.

-- the state would swallow the Medicaid bill by 25 percent next year, 50 percent the following year, and entirely by 2009. The projected cost by then is roughly $600 million.

-- the state would take a quarter-penny of the counties' share of the sales tax next year and then another quarter penny in 2009. The state would also take the $44 million corporate income tax money that counties would get for school construction next year.

-- the state would agree to hold the counties harmless for any revenue losses from 2009 to 2011.

-- the counties would agree to hold cities harmless for any loss in revenues. The sticking point has to do with the options the counties would be given to raise taxes to cover the sales tax loss. The House Democrats say they want counties to have the option of adopting a quarter-penny increase on the sales tax or a .4 percent land transfer tax. Counties would be required to let voters decide to increase either tax through a referendum.

House leaders say Senate Democrats have agreed to the sales tax option, but not the land transfer tax. Negotiations will continue. The question now is whether the rest of the deal will start to unravel.

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