House Democrats who had originally said they did not want to raise taxes in a recession, argue they needed to avoid crushing spending cuts.
But many Republicans say now's not the time to raise taxes.
"Their goal must be to get unemployment up to 15 percent, because that's exactly what will happen if we see a huge tax increase," Sen. Phil Berger said.
But Democrats quickly identified programs that would be saved, including smaller class sizes for kindergarten through third grade.
The House Democrats had proposed higher taxes on tobacco, wine, and beer, but those were voted down on Thursday. The higher sin taxes would have raised $155 million for the state.
House and Senate Democrats can begin negotiating a final spending plan next week. The new budget for the state starts July 1.
