TN TAX BATTLE: GOVERNOR: THROW THEM ALL OUT IF LAWMAKERS DON'T FIND (INCOME TAX) REVENUE

CHATTANOOGA, Tenn. - Gov. Don Sundquist offered some advice to voters if Tennessee lawmakers fail to agree on a new revenue measure and settle for deep spending cuts.

"I think they ought to throw them all out if that's what happens," Sundquist said.

Sundquist made the comment after speaking at a ceremony for a new industrial park northeast of Chattanooga.

Seventeen of 33 state Senate seats and all 99 House seats are on the ballot Nov. 5.

State government faces a $350 million shortfall this year and state leaders agree it will take about $800 million more to avoid program cuts for the fiscal year beginning July 1. The budget plan proposed by Sundquist, a Republican, requires an additional $1.2 billion.

Rep. Beth Harwell, chairwoman of the state Republican Party, said the governor was "expressing his frustration that his budget has not been adopted as of yet."

"I don't think it will have much of an impact," Harwell said of Sundquist's comment. "Do I agree with it? No. There are a lot of good, sincere people on both sides of this issue."

The lame-duck governor, who has unsuccessfully pushed a state income tax, also said a no-new-revenue spending plan - called the Downsizing Ongoing Government Services or DOGS budget - would greatly damage public education.

That plan would cut about $775 million from current spending levels, including some $400 million from K-12 education.

Sundquist has said the only options for balancing the budget are an income tax, a sales tax increase or a no-new-taxes budget. State government receives more than half its revenue from a 6 percent sales tax.

Harwell said her Nashville constituents "would be open to a broadening of the sales tax on certain items." She declined to elaborate about what items or whether such a change should be permanent or temporary.

"I do think the income tax is a constitutional issue and should be put before the people in a referendum," Harwell said. "I would like to see continued cuts in government" and possibly tax law changes.

The state attorney general has advised lawmakers that he could successfully defend an income tax in the courts.

Sen. Jo Ann Graves, D-Gallatin, also disagreed with Sundquist, saying he was as much responsible as any legislators for the impasse over how to deal with the budget shortfall.

"It takes a coordinated effort between the executive branch and legislative branch," Graves said. "It's a little bit of the pot calling the kettle black. I think it takes both parties working together to get a consensus."

Graves said nobody has a plan that is supported by majorities in both the Senate and House.

"The problem we are having right now is everybody saying it has got to be my way or the highway," Graves said.

Graves said she favors a "combination of cuts and some sort of revenue." She said one possible spending cut that senators are discussing is a merger of two agencies, the Department of Economic and Community Development and the Department of Tourist Development.

Speaker wants priority on budget

The Tennessean

Staff Writer

Instead of pushing ''show'' issues, lawmakers sponsoring legislation on school prayer and the flag should be spending their time helping solve the state's budget problem, House Speaker Jimmy Naifeh said yesterday.

''I just wish people who are putting things up for show would work just as hard on trying to get the budget situation we are in solved,'' Naifeh said at his weekly news conference.

''There are show horses and workhorses,'' he said. ''We need more workhorses.''

The House passed a resolution Wednesday urging Congress to adopt a voluntary school prayer amendment to the U.S. Constitution. Legislation is pending to require children to say the Pledge of Allegiance in school daily unless their parents object.

Naifeh brought in state Rep. Rob Briley, a Nashville attorney, to discuss the types of problems those bills present.

''In light of the Sept. 11 tragedy there has been a groundswell of patriotism in this country,'' Briley said.

''That's a great thing. I don't want to diminish anyone's belief in this country or beliefs in their religion, but we have some very difficult decisions to make over the next few weeks. I don't want to diminish the focus on those hard issues by talking about certain issues that may not have real consequences for us.''

Naifeh said the State Funding Board would meet April 22 to re-examine estimates for franchise and excise tax collections this budget year.

''It seems like the (amount) we need to raise goes up each month. It's getting worse instead of better,'' Naifeh said. The state's revenue report for March showed year-to-date collections were $229.4 million less than the budgeted amount. Franchise and excise tax collections accounted for $124 million.

Naifeh said he planned to take a ''hard count'' on what kind of tax measure House members will support.

''If I have 50 people who will look me in the eye and tell me they will vote for it, we will go to the floor with it,'' Naifeh said.

Naifeh said he expected the House to take the lead on passing a tax bill and that he believed the Senate would pass whatever bill the House passes, likely a flat-rate income tax.

Tax Freedom Day Is April 27

By Jim Burns
CNSNews.com Senior Staff Writer
April 10, 2002

(CNSNews.com) - The average American only has a couple of more weeks to work for Uncle Sam and, as of April 27, will have earned enough money this year to satisfy his or her federal income tax burden. "Tax Freedom Day," as proclaimed by a group known as the Tax Foundation, will occur two days earlier than last year and four days earlier than in 2000.

But Tax Freedom Day, which the Tax Foundation calculates each year, doesn't take into account state or local tax obligations. Freedom from the entire income tax burden differs depending on the state in which you live.

Scott Hodge, executive director of the Tax Foundation, said the Bush tax cut plan was a key factor in Tax Freedom Day occurring earlier this year.

"Had it not been for the enactment of President Bush's $1.3 trillion dollar tax cut plan and the mild (economic) recession which dampened tax collections, Washington would have continued to take a greater and greater share of Americans income," said Hodge at a Washington news conference.

Hodge also said the foundation's research found that the tax burden on Americans has fallen by its largest amount since the Reagan administration, but, in Hodge's view, is still too high.

"This year, as Americans have for a decade or so, will work longer to pay for their government than they will work to pay for food, clothing and shelter combined. In fact, Americans will work 80 days just to pay their federal taxes alone, which is greater than they will work to pay for any other single household item," said Hodge.

But Hodge believes there is still bad news for taxpayers from their nation's capital.

"While Washington has done a good deal to cut their taxes in recent years -- there have been three tax cuts in the last five years -- politicians have done so in a way that has added a staggering amount of complexity to a (federal) tax code that no one understands to begin with," said Hodge.

Hodge believes the cost of the tax code complexity will negate many of the benefits that Americans are supposed to enjoy from the tax cuts themselves. One of those areas is tax preparation, because many people and businesses have had to pay huge amounts of money to have their tax forms completed.

"We estimate that individual and corporate taxpayers will spend $194 billion this year to comply with just the income tax code alone," Hodge said. "Our estimates only include the cost of keeping records and the value of people's time to fill out the (tax) forms. One hundred ninety-four billion dollars is greater than the combined revenues of Sears, Walt Disney, Microsoft, Rite Aid, McDonalds and Radio Shack combined," said Hodge.

"Americans will spend a record 5-point-8 billion hours this year on tax compliance, which is equal to a full time workforce of 2-point-8 million people doing nothing but IRS paperwork," he added. "That's equal to the entire population combined of cities like Detroit, Dallas and Washington, D.C."

House Republican Leader Dick Armey (R-Texas) agrees.

Armey Wednesday released what he called "a series of facts on the 2002 tax filing season," highlighting changes in the tax code since Congress enacted the president's tax relief plan last year.

"Americans today continue to be caught in a tax trap," said Armey. "They work harder yet end up keeping less and less of what they earn. Hardworking taxpayers demand and deserve a fairer, simpler tax code so April 15th will be just another normal day."

The Tax Foundation found that Washington, D.C. residents have the worst overall tax burden of any place in the country and won't be free of their tax burdens until May 17. Connecticut's tax burden is heaviest among the 50 states. Residents of the Nutmeg State will have to work until May 14 to meet all of their tax obligations. The next worst is Washington State, where residents will have to work until May 9 to earn enough to pay all of their taxes.

Alaskans will bear the lowest tax burden this year. They completed their responsibilities, on average, April 8. Oklahoma is next -- April 15 -- while residents of West Virginia, Tennessee and Alabama are free of their tax burden a day later, April 16.

Scott Moody, senior economist for the Tax Foundation, said, "in stark contrast to the federal tax burden, the state and local tax burdens have held fairly steady over the past decade."

"State and local taxes tend to be less progressive than the federal tax system. With a progressive tax system, taxes grow at a faster rate than income. This is a result of taxpayers moving into higher tax brackets. While the federal government collects 60 percent of its revenue from income taxes, state and local governments receive only 32 percent of revenue from such income taxes," said Moody.

State and local governments also receive revenue from sales taxes and property taxes, "which do not grow as fast as income (taxes)," Moody said.

Moody also said many states during the last decade have responded to constituents' demands and returned budget surpluses to the taxpayers in forms of rebates and other tax reductions.

The Tax Foundation has calculated Tax Freedom Day each year since 1972, using data from the U.S. Commerce Department's Bureau of Economic Analysis.

April 12, 2002

Bredesen predicts 'blood on ground' in budget battles

The Oak Ridger
From staff reports

Democratic gubernatorial candidate Phil Bredesen spent a good part of Thursday wooing Oak Ridge voters, allowing figuratively that "There's going to be some blood on the ground next year" during the state's ongoing fight over funding and service levels.

Bredesen, the former mayor of Nashville, met for nearly an hour Thursday afternoon with editors, reporters and managers at The Oak Ridger's office, before winding up his day at a fund-raiser hosted by Oak Ridge National Laboratory Director Bill Madia.

"We've gotten ourselves into a difficult position" financially, Bredesen said at the newspaper, while continuing to distance himself from proposals for an income tax for Tennessee.

Bredesen argued that "tax reform" is being paraded by many candidates in a misleading manner as a means of raising millions of dollars in new taxes. Instead, Bredesen argued that there is a need to modernize the state's economy, boosting for example the tourism and entertainment industries that have led the growth in recent years.

"Our industrial recruitment remains focused on manufacturing," said Bredesen, who called for a better mix of initiatives. He was especially critical of tourism effort cutbacks by the state during its current budget impasse.

"We have a low-tax, low-services economy in this state," he said, calling on elected officials to demonstrate more discipline. "We can't have Tennessee taxes and Minnesota services," he said, comparing this state to Minnesota where government services as well as taxes are higher.

Regarding Oak Ridge, Bredesen said the Oak Ridge National Laboratory and University of Tennessee offer the "axis" to develop the technology that can be marketed across the state and beyond.

"There's no reason it (UT) should not be the resource center of the world for the neutron sciences," said Bredesen, who holds a degree in physics from Harvard University.

On TennCare, the state's financially troubled health care insurance for the poor, Bredesen said the current plan suffers from too many ineligible recipients, a benefits package that is too generous and poor regulation by the state of managed care organizations.

"There's a lot of low-hanging fruit in TennCare," Bredesen said in reference to savings he feels can be achieved. He cited his special expertise in health care management as founder of HealthAmerica Corp., a company which acquired troubled health maintenance organizations and turned them into profit-makers. Bredesen, a multimillionaire, has since sold the company.

Bredesen also called on more spending by the state for teachers' pay and after-school education programs. He said he supports a lottery with proceeds earmarked for improving education.

Business board at odds over tax-reform resolution

By Jim Brown

http://www.nashvillecitypaper.com/index.cfm?section=9&screen=news&news_id=11964

WWTN talk radio host Steve Gill asserted the Tennessee Business Roundtable, an association of 153 CEOs across the state, intentionally misled some of its board members by notifying them with little notice or not even at all of a vote on the group’s stance on a state income tax.

Ellen Thornton, TBR’s executive director, said of Gill’s charge, “Every member was duly notified [of the meeting] … two months in advance.”

That may be true, Gill said, but many were not notified of the specific vote.

Thornton confirmed the motion, which was not listed on meeting’s agenda, was added late: “We did not send the resolution out before[hand], but the resolution was assigned at the meeting.”

That has board members like Todd Kaestner less than happy.

“The [TBR’s Wednesday] press release appears as though the Roundtable is of one mind,” Kaestner said. “That’s my problem.”

The group’s resolution was adopted “without dissent” in Nashville April 2, according to its release. It warned the state is in “dire straits due to a deficiency of revenue” and called for “tax reform with fair, equitable, adequate competitive and federal deductibility components, one of which may necessarily be taxation of personal income with reasonable restraints on increases … .”

Neither Thornton nor TBR President Wayne McCreight, CEO of Hamilton-Ryker in Martin, would confirm what was said at the meeting or who added the motion.

McCreight did emphasize he would “like to lay the skunk [tax issue] on the table. … We as a group took a stand. It’s time.”

Gill, who used his Thursday a.m. show as a platform, said other board members he knows were “not notified [the vote] was going to be on the agenda.”

Gill said the TBR has tried to pass similar resolutions before with no success. Thornton — who very recently replaced Department of Labor and Workforce Commissioner Michael E. Magill as TBR’s executive director — said to her knowledge that “was not correct.”

That differs with the version from Kaestner, who cited two instances of past friction. A fall survey of total membership noted 39 percent are opposed to a state income tax, Kaestner said.

“[Also], in 2000, this topic came up, and it was obvious we were not of one mind,” he said. “So we tabled it.”

Gill said the April 2 resolution was driven by behind-the-scenes work from Lew Conner, an attorney with Stokes & Bartholomew, and Darrell Akins, CEO of Akins-Crisp Public Strategies, an agency that handles the Tennessee Economic & Community Development department’s $2.5 million advertising budget.

Akins, who along with President John Crisp supported Gill’s runs for Congress, shrugged off Gill’s comments, saying, “I did not make the motion, nor did I second the motion.”

“Neither did I,” Conner said, noting the resolution occurred because of “a groundswell of everyone in that room to stand up and be counted. … All of us perceive this state to be in crisis.”

Gill, who called the Gov. Don Sundquist administration more corrupt than the Ray Blanton administration on his show Thursday, questioned Akins because of his contract with the state.

“Akins-Crisp is getting a lot of money to support what the governor wants,” Gill said.

Akins called those charges “patently ridiculous.”

We won this contract in [a competitive bid],” he said, saying his state work will run through Sundquist’s tenure and not be re-bid.

Crisp, Gill’s roommate in college and a “lifelong friend,” said, “I’m going to talk with Steve” about his comments.

Akins said the April 2 meeting was “by far the largest board meeting we [have] had. I was one of some 22 board members that passed this resolution,” Akins said.

Only one of 22 members abstained from voting, Conner said, with the other 21 in favor.

Kaestner quarreled with the format, asserting “less than half the board” was present.

Will Lawmakers Have Guts To Deal With Budget?

News 3 Memphis 04/12/02

By Alex Coleman

Memphis-No answers to Tennessee's budget problems has many lawmakers frustrated and embarrassed. Many lawmakers such as State Representative John DeBerry of Memphis want to know if their counterparts will ever have the political guts to step up to the plate to find 350 million dollars. DeBerry says, "What has to happen now? Those elected to lead have got to do just that. We've got to lead."

The lack of ability of some state lawmakers to lead is in question. It's in question because some legislators are doing nothing with about the budget fiasco. Jimmy Naifeh of Covington is House Speaker. Naifeh says, "The Budget with no revenue would be disastrous to the state. It wouldn't set us back years, it would set us back generations."

Lawmakers have wrangled with the budget for four years. Yes, four long years.

The primary options they've looked at being an income tax, increasing the sales tax or making deep cuts in state spending.

But after all this time nothing has been accepted by a majority of the past two General Assemblies. DeBerry says, "If our decisions cost us popularity or cost us our job. It's better than it cost Tennessee any more it's prestige right now we're going down and we got to stop the skid." The budget skid is so bad the state attorney general has threatened to step in.

Paul Summers has warned lawmakers to either pass a budget or wind up in court.

That's because the Tennessee Constitution requires the legislature to balance the budget every year.

Some lawmakers say letting someone else pass the budget during this political year wouldn't be the right thing to do. DeBerry says, "I think that's the coward's way and I think folks should see it as that. I stand ready to vote" Ready to vote, but on what?

Lawmakers say a Flat Tax proposal has picked up some support. Naifeh says, "That would do away with the sales tax on groceries, sales tax on essential clothing items and sales tax on non- prescription drugs and eliminate the Hall Income tax and bring in enough to fund the debt."

It's estimated the flat tax could generate about a billion dollars. Lawmakers hope to possibly vote on it in a few weeks.

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