Posted on 05/22/2002 11:17:34 PM PDT by GailA
Tax plan on life support
Not done, Naifeh says as bill fails
By Tom Humphrey, News-Sentinel Nashville bureau May 23, 2002
NASHVILLE - A state income tax fell five votes short of House approval Wednesday, apparently after a handful of legislators reneged on private commitments of support.
House Speaker Jimmy Naifeh, who sponsored the bill, refused to have the vote recorded as official for almost two hours after it was taken, spending most of that time trying to change some minds.
The result was four representatives switching from "no" to officially abstaining, or declining to vote either way, but no increase in the yes votes.
The final official tally was 45 yes, 49 no and four abstaining. Fifty votes are required for House passage.
"We're not through," Naifeh said afterward, declaring that he remains open to revisions in hopes of winning more support. The bill actually took final form only hours before being put on the floor for a vote, though the basics had been approved in committee two weeks ago.
The measure is centered on a 4.5 percent flat-rate state income tax with exemptions of $15,000 for singles and $30,000 for a married couple filing jointly.
The income tax would take effect Jan. 1, giving the Department of Revenue time to gear up for collections. In the meantime, the state sales tax would have been increased from 6 percent to 7 percent effective July 1, then rolled back to 6 percent Jan. 1.
Also on Jan. 1, all (MY NOTE: THIS IS A LIE, ONLY NON-PREPARED FOODS, AND CERTAIN CLOTHES WOULD HAVE THE SALES TAX REMOVED state and local sales taxes on grocery food and clothing costing less than $500 per item would be repealed. An earlier version exempted only clothing costing less than $100. The tax on nonprescription drugs would have been repealed effective July 1 under the final version.
The biggest late change was adding increased state taxes on tobacco and alcohol to the Naifeh package. The tax on cigarettes would have increased by 7 cents per pack to 20 cents while taxes on beer, wine and liquor would have gone up 10 percent.
The final version also earmarked proceeds from the tobacco tax increase to be split between two special funds, one to benefit farmers and the other to benefit health care. (NOTE: CURRENT TOBACCO TAX GOES TO EDUCATION)
Another provision declared that, if the income tax is subsequently held to be unconstitutional, the state sales tax rate would jump to 7.5 percent.
Naifeh and other supporters had tinkered with the package for some time in hopes of winning more support and, on Wednesday morning, he and key lieutenants said they had lined up enough votes for passage. The bill had been positioned to be called up on a moment's notice.
At 1:27 p.m., Naifeh and Rep. Tommy Head, D-Clarksville, did so.
"This has been a long time in coming," Naifeh said in a floor speech, citing a four-year stalemate on tax changes. "It will define us as a Legislature. It will define the state of Tennessee. So much hinges on us passing this."
There was only brief debate, with just two income tax opponents voicing criticism. They were Reps. Bill Dunn, R-Knoxville, and Jack Sharp, R-East Ridge.
The bill is drafted so the tax is levied upon the "privilege" of earning income, since the state constitution authorizes taxes on privileges though not specifically on personal income. The state Supreme Court ruled in 1932 that a direct personal income tax was unconstitutional, but Attorney General Paul Summers has advised legislators that wording the bill to levy a tax on the "privilege" of earning income would be valid.
MY NOTE: TENNESSEE IS A RIGHT TO WORK STATE
Dunn said he had understood that "working in Tennessee is a right, not a privilege," and questioned whether the bill would revise that status. Rep. Matt Kisber, D-Jackson, replied that the wording was "solely for the purposes of this act" and had been suggested by Summers as "the most effective and legally sound" language.
Sharp said the tax was ruled unconstitutional by the Supreme Court and any change should come through a constitutional amendment.
"It is time to do something. It is not time to do the wrong thing. It is never the time to do the wrong thing," said Sharp.
House Speaker Pro Tempore Lois DeBerry, D-Memphis, urged enactment of the bill to "move this state forward" instead of closing parks, laying off teachers and making other budget cuts.
"Deep down in your hearts, every one of you knows that our tax structure needs restructuring," DeBerry said.
The vote was called at 3:12 p.m. and the machine showed 45 yes, 53 no.
One of the 99 members, Rep. Sherry Jones, D-Nashville, an ardent opponent of an income tax injured in a traffic accident recently, was absent.
Naifeh then refused to have the vote recorded, or made official, and representatives milled around the floor as the speaker and others unsuccessfully sought an extra five votes. That continued about two hours, until the final vote was recorded.
The speaker said afterward that he was surprised and disappointed by the result but has not given up the quest for tax reform.
Opponents of an income tax, however, characterized the result as a major setback that should set the stage for consideration of other options.
Tom Humphrey may be reached at 615-242-7782 or humphrey@edge.net.
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