Posted on 06/30/2002 4:07:01 AM PDT by GailA
New plan would have voters pick method of paying more to the state
By Tom Humphrey, News-Sentinel Nashville bureau
June 30, 2002
NASHVILLE - The Tennessee Senate is expected to vote today on the largest tax increase in Tennessee history.
If the measure passes it will let voters decide in November how it is collected.
The Senate Finance Committee passed the bill Saturday and advanced it to the full Senate, which debated it for several hours. The Senate adjourned at 10:55 p.m. EDT without taking a vote and will reconvene this morning at 9.
If the bill passes the full Senate, it then goes to the House for final action.
The plan would put a statewide referendum on the Nov. 5 ballot on whether Tennessee should hold a constitutional convention on taxes. </>
But the vote would carry consequences beyond simply calling a convention under the plan originated by Sen. David Fowler, R-Signal Mountain.
If voters decide to hold a convention, a 4.5 percent state income tax, coupled with a rollback in some other taxes, would be imposed starting Jan. 1, 2003.
The tax plan - basically the proposal championed by House Speaker Jimmy Naifeh that fell five votes short of passing in the House in May - would remain in effect until the convention completes its work and submits a proposal for another statewide vote.
Delegates to the convention would be chosen in the Aug. 5, 2004, election. They would meet in September 2004 and decide on a proposal to submit to voters. The convention would also pick the date for the final vote on its proposals.
On the other hand, if voters reject the constitutional convention, the state sales tax rate would permanently increase from 6 percent to 7.5 percent on Jan. 1.
Local governments could continue to add up to 2.75 percent in taxes, meaning the combined maximum state and local sales tax rate would rise from the present 8.75 percent to 10.25 percent.
"This gives the people a choice," said Fowler. "This is a means by which we can bring a conclusion to the situation we're in."
The Legislature faces a deadline of midnight tonight for enacting a state budget for the 2002-03 fiscal year, which begins then. Legislators have been deadlocked over competing tax proposals and alternative plans to cut the state budget by at least $875 million.
Either the 1.5 percentage point sales tax increase or Naifeh's 4.5 percent income tax plan would resolve the dilemma by raising more than $1 billion in new state revenue.
That would far surpass the largest tax increase in Tennessee history, a sales tax increase from 4.5 percent to 5.5 percent in 1984 at the urging of Gov. Lamar Alexander. That brought in $351 million in new annual revenue, though the sales tax base has grown enough since then to make a penny per dollar on the sales tax rate generate approximately $700 million per year.
The sales tax was raised from 5.5 percent to 6 percent in 1992 at the urging of Gov. Ned McWherter. The half-cent was calculated to bring in $276 million per year at that time.
The proposal that advanced Saturday, labeled "the Fowler-Naifeh" plan, was brought before the Finance Committee late in the afternoon and approved with only brief debate. Fowler, who has generally opposed a state income tax, promised to vote for the plan if his proposal were adopted.
Only two members of the committee, both income tax advocates, voted against the proposal, though Naifeh on Saturday night also had not agreed to back it. The no votes came from Sens. Bob Rochelle, D-Lebanon, and Gene Elsea, R-Spring City.
Voting for the plan in committee were Sens. Ben Atchley, R-Knoxville; Tim Burchett, R-Knoxville; Bill Clabough, R-Maryville; Ward Crutchfield, D-Chattanooga; Joe Haynes, D-Nashville; Jim Kyle, D-Memphis, and Committee Chairman Douglas Henry, D-Nashville.
A quick nose count showed the bill has enough support to pass on the Senate floor.
"I don't like it, but we've got to get some money in the bank," said Henry.
Rochelle criticized the Fowler proposal as "a gimmick" and questioned whether it would violate constitutional rules against the Legislature delegating its decisions to others, including the public.
"I think a court would find it unconstitutional," said Rochelle. "The Legislature has to make the hard choices - not slough it off on the public."
But Fowler said that Attorney General Paul G. Summers, in a formal opinion on a similar proposal earlier in the year, wrote that giving voters such an option would be "constitutionally defensible."
Similar proposals have been floated before, but never won a committee's approval. In the past, a major sticking point has been the timing of a constitutional convention.
Income tax advocates have generally wanted the new tax in place for two years before they vote on the question so taxpayers can, as Rochelle puts it, "be educated on how it works." Income tax opponents have insisted that the constitutional referendum should come first, before implementation of the tax.
The proposal calls for an increase in the state sales tax from 6 percent to 7 percent effective immediately and continuing until Jan. 1, when either the income tax or higher sales tax rate would begin.
The Naifeh plan's 4.5 percent tax would begin at $15,000 in adjusted gross income for an individual, $30,000 for a married couple filing jointly. There would be an extra $1,500 exemption per dependent.
The plan would also increase state taxes on alcohol and tobacco by 10 percent while repealing the current sales tax on grocery food, non-prescription drugs and clothing on Jan. 1.
Tom Humphrey may be reached at 615-242-7782 or humphrey@edge.net
Here's how the Fowler proposal would work
• Starting July 1, the state sales tax rate would increase from 6% to 7%. Local rates would stay the same with 2.75% being the highest imposed.
• On Nov. 5, Tennesseans would vote on whether to hold a constitutional convention. If they vote no, the income tax would start Jan. 1. If they vote yes, or if the Tennessee Supreme Court says an income tax is unconstitutional, a 7.5% state sales tax would be implemented Jan. 1 and the process of a constitutional convention would take place. This would push the total sales tax in some parts of Tennessee to above 10%.
• If the convention takes place, delegates would be elected in August 2004, and the convention would be held the following September. Any amendments proposed by the convention would be submitted to voters for ratification.
http://www.tennessean.com/government/archives/02/06/19372847.shtml?Element_ID=19372847 Legislature passes 'safety net' plans to continue key services
ERIC PARSONS / STAFF Deputy Governor and Chief of Staff Alex Fischer, left, and Gov. Don Sundquist meet with the Cabinet yesterday morning to discuss the possibility of laying off thousands of nonessential state employees.
By BONNA de la CRUZ and DUREN CHEEK Staff Writers
As the state approached a shutdown of non-emergency services, beginning at midnight tonight, state lawmakers took preliminary steps last night to authorize a flat-rate 4.5% state income tax — with a twist.
And that twist may allow voters to kill the tax before it is ever imposed.
Also, the Senate approved an emergency services plan that would buy it five more days to finish its business. The House followed suit, passing a slightly different version, after an extraordinary appearance by Gov. Don Sundquist on the House floor shortly after 10 p.m., where he pleaded with lawmakers to act.
''If we do not pass this legislation to ensure a safety net, we run the risk of prisons without prison guards, children in state custody without care, mentally ill patients unattended, communities and highways without protective services and emergency management services, to name just a few,'' the governor said.
State Attorney General Paul Summers also appeared before the House, cautioning that the state ''will be besieged by lawsuits immediately'' if there were no emergency appropriation.
Just before midnight, the House approved the emergency plan by a vote of 86-2, with 7 present but not voting.
The Senate is scheduled to reconvene at 9 a.m. today, to reconcile the two versions of the emergency services plan and to consider the income tax proposal and possibly others.
Under a version of the income tax passed by the Senate Finance Committee last night, Tennesseans would be allowed to vote in November on whether they want it to begin Jan. 1, or whether they want it deferred until a constitutional convention in 2004, and perhaps killed. Meantime, increased sales taxes would fund government services.
The tax plan drew some support from Senate Republicans because it includes the November public vote. But staunch income tax advocates don't want that vote to take place until the income tax has been in place for a period of time.
Neither the full House or Senate took a vote on a tax plan last night but were continuing to meet during a rare weekend session.
Lawmakers need to raise $877 million for the 2002-03 budget, which starts tomorrow, to maintain state services at current levels. Lawmakers are bound by the state Constitution to pass a balanced budget before the start of the fiscal year. This is the fourth year of an impasse over taxes.
If the General Assembly does not approve a budget by midnight, the state plans to furlough 22,000 state workers for five days starting tomorrow to buy the legislature more time.
The partial shutdown may be implemented even if new taxes are approved because budget cuts and other fine-tuning may not be completed in time tonight.
During the furlough, state parks would remain open, in part to accommodate visitors during the busy July Fourth holiday, but all state road projects would be halted.
Dorms at the University of Tennessee and other state colleges will remain open, but the start of summer school will be delayed, some to July 8, Deputy Gov. Alex Fischer said. The partial state shutdown would not include essential services such as prisons, courts, safety, TennCare, children's services, and other health and mental health programs.
Earlier, Sundquist laid the blame at the feet of the General Assembly.
''If the government shuts down, it's not your fault,'' Sundquist told his departments heads during a morning Cabinet meeting. ''It's a result of the delays of the General Assembly (members) who refuse to do anything.''
Sen. David Fowler, R-Signal Mountain, brought forward the income tax plan and said he would be the 17th vote on the Senate floor to approve it. It takes 17 votes to pass a measure.
The committee voted 7-2, with Sen. Micheal Williams, R-Maynardville, abstaining. However, it was clear that some members voted for the proposal because they planned to attempt changing provisions around the constitutional convention.
A similar argument over the timing of such a convention was taking place a year ago when lawmakers were considering an income tax before a crush of anti-tax protesters noisily disrupted legislative proceedings, which quickly wrapped up with no income tax.
Income tax advocates oppose the latest proposal's schedule because they say people should get a chance to live under the income tax for a period of time. Otherwise, the reaction this November may be to vote for the convention to kill the income tax, said Sen. Bob Rochelle, D-Lebanon, an income tax advocate and speaker pro tem of the Senate.
But Fowler said the very heart of his proposal lies in giving voters a say before the income tax starts.
Groups that support an income tax said that gives them little time to educate voters on the tax plans.
''This puts us under a tremendous amount of pressure to educate the people with our meager funds before November,'' said Nell Levin of the Tennessee Alliance for Progress.
Voting for the plan were Ben Athchley, R-Knoxville; Tim Burchett, R-Knoxville; Bill Clabough, R-Maryville; Ward Crutchfield, D-Chattanooga; Joe Haynes, D-Goodlettsville; Jim Kyle, D-Memphis; and Douglas Henry, D-Nashville.
Voting no were Rochelle and Gene Elsea, R-Spring City.
Burchett said he would change his vote to no if the full Senate amends the plan to hold the referendum after the income tax is imposed.
Williams said he abstained because he was fearful the legislation would be used as a vehicle to pass an income tax that would start before a convention.
There are several backup plans, including one that cuts $750 million in current spending and another that would raise the state sales tax 1 percentage point and raise alcohol and cigarette taxes.
Sen. Doug Jackson, D-Dickson, told members he did not plan to proceed with his tax proposal until today and only if no other tax plan passes.
The proposal, called the Continuing Adequate Taxes and Services plan by its sponsors, which would raise $766 million, imposes new business taxes, raises the sales tax statewide to 8.75% and increases alcohol and cigarette taxes.
''This should be viewed as a life preserver,'' Jackson said.
Earlier in the day, Lt. Gov. John Wilder spoke from the well of the chamber, saying lawmakers must act soon. He told his members he would not tell them what to do but trusts they will do what's right for Tennessee.
The speech covered many of the same points Wilder has made in public addresses regarding the budget over the past three years, making the point that he believes it is wrong that the federal government does not permit taxpayers to deduct sales taxes on their federal returns.
''This morning about three o'clock, a bed devil got in bed with me,'' Wilder told the hushed chamber. ''That bed devil's name was Uncle Sam. He was in bed with me. We've got a problem. We need equity in taxation and efficiency in government.''
On the issue of the partial shutdown, during a midday Cabinet meeting Sundquist said 22,000 of the state's 42,000 employees would be notified by midday today whether they fall into what the state is calling a ''non-emergency/basic operations'' category and would be furloughed temporarily.
The remainder would be notified they fall under ''emergency'' status and should report to work tomorrow.
Legislature passes 'safety net' plans to continue key services
By BONNA de la CRUZ and DUREN CHEEK Staff Writers
As the state approached a shutdown of non-emergency services, beginning at midnight tonight, state lawmakers took preliminary steps last night to authorize a flat-rate 4.5% state income tax — with a twist.
And that twist may allow voters to kill the tax before it is ever imposed.
Also, the Senate approved an emergency services plan that would buy it five more days to finish its business. The House followed suit, passing a slightly different version, after an extraordinary appearance by Gov. Don Sundquist on the House floor shortly after 10 p.m., where he pleaded with lawmakers to act.
''If we do not pass this legislation to ensure a safety net, we run the risk of prisons without prison guards, children in state custody without care, mentally ill patients unattended, communities and highways without protective services and emergency management services, to name just a few,'' the governor said.
State Attorney General Paul Summers also appeared before the House, cautioning that the state ''will be besieged by lawsuits immediately'' if there were no emergency appropriation.
Just before midnight, the House approved the emergency plan by a vote of 86-2, with 7 present but not voting.
The Senate is scheduled to reconvene at 9 a.m. today, to reconcile the two versions of the emergency services plan and to consider the income tax proposal and possibly others.
Under a version of the income tax passed by the Senate Finance Committee last night, Tennesseans would be allowed to vote in November on whether they want it to begin Jan. 1, or whether they want it deferred until a constitutional convention in 2004, and perhaps killed. Meantime, increased sales taxes would fund government services.
The tax plan drew some support from Senate Republicans because it includes the November public vote. But staunch income tax advocates don't want that vote to take place until the income tax has been in place for a period of time.
Neither the full House or Senate took a vote on a tax plan last night but were continuing to meet during a rare weekend session.
Lawmakers need to raise $877 million for the 2002-03 budget, which starts tomorrow, to maintain state services at current levels. Lawmakers are bound by the state Constitution to pass a balanced budget before the start of the fiscal year. This is the fourth year of an impasse over taxes.
If the General Assembly does not approve a budget by midnight, the state plans to furlough 22,000 state workers for five days starting tomorrow to buy the legislature more time.
The partial shutdown may be implemented even if new taxes are approved because budget cuts and other fine-tuning may not be completed in time tonight.
During the furlough, state parks would remain open, in part to accommodate visitors during the busy July Fourth holiday, but all state road projects would be halted.
Dorms at the University of Tennessee and other state colleges will remain open, but the start of summer school will be delayed, some to July 8, Deputy Gov. Alex Fischer said. The partial state shutdown would not include essential services such as prisons, courts, safety, TennCare, children's services, and other health and mental health programs.
Earlier, Sundquist laid the blame at the feet of the General Assembly.
''If the government shuts down, it's not your fault,'' Sundquist told his departments heads during a morning Cabinet meeting. ''It's a result of the delays of the General Assembly (members) who refuse to do anything.''
Sen. David Fowler, R-Signal Mountain, brought forward the income tax plan and said he would be the 17th vote on the Senate floor to approve it. It takes 17 votes to pass a measure.
The committee voted 7-2, with Sen. Micheal Williams, R-Maynardville, abstaining. However, it was clear that some members voted for the proposal because they planned to attempt changing provisions around the constitutional convention.
A similar argument over the timing of such a convention was taking place a year ago when lawmakers were considering an income tax before a crush of anti-tax protesters noisily disrupted legislative proceedings, which quickly wrapped up with no income tax.
Income tax advocates oppose the latest proposal's schedule because they say people should get a chance to live under the income tax for a period of time. Otherwise, the reaction this November may be to vote for the convention to kill the income tax, said Sen. Bob Rochelle, D-Lebanon, an income tax advocate and speaker pro tem of the Senate.
But Fowler said the very heart of his proposal lies in giving voters a say before the income tax starts.
Groups that support an income tax said that gives them little time to educate voters on the tax plans.
''This puts us under a tremendous amount of pressure to educate the people with our meager funds before November,'' said Nell Levin of the Tennessee Alliance for Progress.
Voting for the plan were Ben Athchley, R-Knoxville; Tim Burchett, R-Knoxville; Bill Clabough, R-Maryville; Ward Crutchfield, D-Chattanooga; Joe Haynes, D-Goodlettsville; Jim Kyle, D-Memphis; and Douglas Henry, D-Nashville.
Voting no were Rochelle and Gene Elsea, R-Spring City.
Burchett said he would change his vote to no if the full Senate amends the plan to hold the referendum after the income tax is imposed.
Williams said he abstained because he was fearful the legislation would be used as a vehicle to pass an income tax that would start before a convention.
There are several backup plans, including one that cuts $750 million in current spending and another that would raise the state sales tax 1 percentage point and raise alcohol and cigarette taxes.
Sen. Doug Jackson, D-Dickson, told members he did not plan to proceed with his tax proposal until today and only if no other tax plan passes.
The proposal, called the Continuing Adequate Taxes and Services plan by its sponsors, which would raise $766 million, imposes new business taxes, raises the sales tax statewide to 8.75% and increases alcohol and cigarette taxes.
''This should be viewed as a life preserver,'' Jackson said.
Earlier in the day, Lt. Gov. John Wilder spoke from the well of the chamber, saying lawmakers must act soon. He told his members he would not tell them what to do but trusts they will do what's right for Tennessee.
The speech covered many of the same points Wilder has made in public addresses regarding the budget over the past three years, making the point that he believes it is wrong that the federal government does not permit taxpayers to deduct sales taxes on their federal returns.
''This morning about three o'clock, a bed devil got in bed with me,'' Wilder told the hushed chamber. ''That bed devil's name was Uncle Sam. He was in bed with me. We've got a problem. We need equity in taxation and efficiency in government.''
On the issue of the partial shutdown, during a midday Cabinet meeting Sundquist said 22,000 of the state's 42,000 employees would be notified by midday today whether they fall into what the state is calling a ''non-emergency/basic operations'' category and would be furloughed temporarily.
The remainder would be notified they fall under ''emergency'' status and should report to work tomorrow.
Bobbie Patray of Eagle Forum a long time watch dog on Capitol Hill has told me that the Con-Con will be RIGGED to produce an income tax no matter what the voters want.
We have to burn up the phone lines to our legislators.
Sounds like a 'Win-Win' Situation . . .
That is - if one is a Facist/Socialist/Communistic son-of-one legged sheep herder like Naifeh (or Rochelle. . .or Dumbquist...or etc, etc, etc....) who can only cry-n-moan for more and more ways to empty the pockets (and Pay Cheques) of every Tennessean with a Pulse. Heaven forbid that they actually attempt to learn to 'spend' what they already have a great deal more wisely !! !! !! !! !!
''This puts us under a tremendous amount of pressure to educate the people with our meager funds before November,'' said Nell Levin of the Tennessee Alliance for Progress.
Translation: "We want more money! Nobody in their right mind is volunteering to give us any!"
There was a lot of confusion about this on talk radio this morning. Both Ben Atchley and Tim Burchett said Tom Humphrey had it backwards. Of course, Humphrey had written earlier that John Mark Windle voted yes for the income tax when he voted no.
But Sen. Rochelle (D), you've already proven you're not even willing to consider the tough choices let alone make any. The citizens of Tennessee have told you they have no money for an income tax and you should look to making some budget cuts. Now go do it, you big whiny baby.
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