Deadline near but tax plan elusive Naifeh's proposal only 3 votes short
By Richard Locker locker@gomemphis.com
June 25, 2002
NASHVILLE - Income tax proponents worked feverishly behind the scenes Monday to resuscitate their tax reform plan while the state legislature as a whole treaded water six days before Sunday's budget deadline.
Both the Senate and House finance committees failed to meet their self-imposed Monday deadline for sending some alternative tax and budget measure to the floors amid reports House Speaker Jimmy Naifeh may now be only three votes short of the 50 he needs to pass a 4.5 percent flat-rate income tax plan in the House of Representatives.
A floor vote could come without notice any day, including today.
Horn-honking anti-tax protesters returned to the sidewalks and streets across from the Capitol Monday and, with the possibility of a tax vote anytime, are likely to remain all week. The NAACP announced plans Monday for a march to the Capitol area at 11 a.m. today in support of a state income tax.
Gov. Don Sundquist and other income tax proponents mounted a full-court press to sway votes for the Naifeh plan, including discussions of lowering its 4.5 percent rate to less than 4 percent and other alterations to pick up votes. Sen. Jerry Cooper (D-McMinnville) said Naifeh told a meeting of legislative leaders and the governor Monday afternoon that he believes he is now three votes short and is hopeful he can pick them up today.
In summary, lawmakers say privately that Naifeh effectively has until Wednesday to win House approval of the income tax, defer to some alternative tax plan or move toward a no-new-taxes budget.
With six days to go until some budget measure must be adopted or a partial shutdown of government is triggered, there were these developments:
Higher education officials told the Senate Finance Committee that another 15 percent in-state tuition increase is likely to partially make up for the no-new-taxes budget plan's $93 million in cuts to campuses. It would be the fourth year of double-digit increases, and the officials said it would make tuition at Tennessee colleges and universities the highest in the region. (MY NOTE there are 50 higher ed facilities in TN..93 divided by 50 is 1.86 a piece)
Even with the big tuition increases, degree programs and personnel would be slashed and classes would become even larger, the officials said. The Senate committee ended testimony Monday on the impacts of a no-new-taxes budget being drafted if no new tax is passed.
Sen. David Fowler (R-Chattanooga) presented a sweeping new tax plan that would raise $933 million in state revenue through increases in numerous existing business and personal taxes and extending the taxes to previously untaxed businesses. The Fowler plan would increase sales taxes to 8.75 percent, increase taxes on vehicle registration fees, double the current $1,600 limit on a single-item purchase that local sales taxes are applied to, raise the corporate excise tax from 6 to 6.25 percent, increase taxes on cigarettes and alcohol products, impose the sales tax on several services now exempt and other measures.
Fowler asked the committee to delay a vote on his proposal until today.
Sponsors of the so-called CATS budget, which would raise sales and other taxes, raise $771 million and require about $100 million in cuts, did not present their proposal in the Senate committee Monday and did not ask for a vote in the House Finance Committee. That indicates they lack enough votes to win passage in the committees, its opponents say. "Some of the proponents of the income tax would push this to the eleventh hour and say it's either the income tax or a shutdown," said Rep. Frank Buck (D-Dowelltown), House sponsor of the CATS budget. He said he will not ask for a Finance Committee vote "until the most advantageous time."
Sen. Jerry Cooper (D-McMinnville) said the Senate delayed action on every alternative tax plan Monday because Naifeh told a meeting of legislative leaders and Sundquist that he was optimistic he could garner enough support for the income tax.
"I'm encouraged by the ability of Speaker Naifeh in getting the three votes he needs. He thinks that he's got a good chance.
"We're down to the no-new-taxes budget, shutting the government down or the income tax," Cooper said.
Sen. Jim Kyle (D-Memphis), vice chairman of the Senate Finance Committee, said he was alarmed by the committee's failure to act Monday, in defiance of its own deadline.
Contact Nashville Bureau chief Richard Locker at (615) 255-4923.
Lawmakers continue to talk about CATS as budget deadline looms
By TIM WHALEY
A revised version of the Continuing Adequate Taxes and Services budget is set to be heard today in the House Finance Committee as the state legislature appears once again to be foundering on the edge of a government shutdown.
A budget must be in place by Sunday night to avoid such a shutdown. A 4.5 percent income tax plan appears dead in the water, and a second plan to cut $945 million from state government doesn't even have a sponsor.
The latest version of CATS calls for a two-phase plan.
On July 1, the one-time registration fee on freight trailers would rise from $50 to $75, while tabbing some $37 million from the Department of Transportation and jacking up sin taxes on alcohol and tobacco.
Cigarette taxes would jump 30 cents per pack alone.
The state tax on gasoline and diesel would rise by 2 cents, and corporate excise taxes would rise by .25 percent. The original CATS plan anticipated a .75 percent increase on business income.
Also, the state sales tax would rise one full percent to 7 percent from July to August, and energy taxes would rise from 1.5 percent to 2 percent.
Then, on Sept. 1, a new graduated vehicle registration fee would be imposed on passenger and antique vehicles. The top rate would be $85 for a car that is five years old or newer in addition to the existing $24 registration fee.
Vehicles that are 10 years old or newer would pay a total of $99, while vehicles of 21 to 25 years of age would be assessed a total $39 state registration fee.
Also on Sept. 1, the state sales tax would be unified, eliminating local option sales taxes, and a state sales tax rate of 8.75 percent would be levied in every jurisdiction.
That could result in a .25 percent sales tax hike in Kingsport, a .50 percent hike in Sullivan County and a 1.25 percent increase in Johnson City.
That new 8.75 percent state sales tax rate would then be extended to a host of services, including pest control, cleaning services, detective and security services, landscape services, barber services, amusements and "operator or crew services."
The sales tax would also go to 8.75 percent on telecommunications services, including cable and wireless services, and satellite television.
Exempted items would be brought in as well at 8.75 percent, including nonprofit sales at gun shows, rentals of films and transcripts, construction machinery transferred from a parent corporation to a subsidiary corporation, the first $150 of club memberships, capital improvements to recreation clubs, physical fitness facility fees, taxidermists and legend drugs sold by veterinarians.
The measure would raise $939 million the first year.
Local governments would receive an increase of $2.7 million in the first year and would be held harmless from the loss of local option sales tax revenues.
In exchange from all those tax increases, the measure would reduce the tax on food for human consumption to 5 percent. (MY NOTE PLUS THE LOCAL OPTION)
"This is just a sort of variation on everything out there," Rep. Ken Givens, D-Rogersville, said. "It's a plan a minute right now down here.
"But none of them amount to much, and I think we are fast approaching passing a cut budget with no new revenue."
Such a measure would require at least $845 million in cuts from existing state services.
Last week, the House Finance Committee decided that if the no new revenue plan goes into effect, the state will take back $368 million in state-shared taxes given to local governments. Using those funds would soften the original plan's $400 million cut to K-12 education.
"Chances are very slim that the state-shared cut will stand up," Givens said. "But I would say chances are very good that the cuts in K-12 will hold."
Meanwhile, state Sen. Ron Ramsey, R-Blountville, says the CATS plan is the only plan with a chance right now.
"It's quite obvious the income tax is not going to pass, so it's time for the income taxers to fish or cut bait and this is not pretty, but it's the most viable option on the table," Ramsey said. "Nobody wants to cut and nobody wants to take money from local governments, so in my opinion, this is by far the best option out there."