Posted on 07/04/2002 7:38:33 AM PDT by GailA
Lawmakers raise sales, other taxes to end shutdown By Paula Wade and Richard Locker wade@gomemphis.com locker@gomemphis.com July 4, 2002
NASHVILLE - The Tennessee legislature Wednesday raised the sales tax from 6 to 7 percent beginning July 15, (NOTE: SALES TAX ON FOOD WAS NOT RAISED)and hiked other taxes to restore state government to full operation Friday morning after four days in partial shutdown. Lawmakers adopted the mostly lobbyist-written tax plan after House Speaker Jimmy Naifeh, Gov. Don Sundquist and other reform-minded advocates of an income tax conceded defeat Wednesday morning, ending a 3d-year budget stalemate. Sundquist said he will sign the bill passed Wednesday. But its sponsors warned that while the plan will fund current government services for this year, it will be adequate for only another two years, depending on the strength of the economy.
The plan is expected to generate $933 million - the largest one-time tax increase in Tennessee history. It passed the Senate with ease, 22-11, but won approval in the House with exactly the 50 votes required, 50-41.
The legislature also approved a $20 billion state budget late Wednesday that will return the state's 22,000 furloughed employees to work Friday. The budget includes $9.46 billion in state taxpayer dollars and the rest is from the federal government, student tuition and other fees.
But the legislature won't adjourn until today what has become the longest, most tumultuous and bitter General Assembly in recent memory. "Employees who normally work on Independence Day should report to work Thursday (today), and the rest of state government will be fully functioning Friday morning," said Alexia Levison, the governor's press secretary. That means shuttered services like driver's licensing stations, welcome centers and university classes will resume.
The tax plan is complicated. It would raise the general state sales tax to 7 percent effective July 15. However, the tax on grocery food will remain at 6 percent. And the plan alters the single-article cap to which local sales tax rates apply: For single-item purchases up to $1,600, local sales taxes are levied at their current rate, which is 2.25 percent in Shelby County. But from $1,600 to $3,200, a uniform statewide local sales tax of 2.75 percent will be applied, with the $39 million in proceeds flowing to the state instead of local governments.
The plan also raises the corporate excise, or profits, tax from 6 to 6.5 percent. It raises cigarette taxes by 7 cents a pack and taxes on alcoholic beverages by 10 percent across the board. It applies sales taxes to purchases from vending machines, like soft-drinks, and to coin-operated amusements such as arcade games.
It increases local business taxes by 50 percent, with the state retaining the increase. And it doubles the current $200 annual tax on many state-licensed professionals. Finally, the plan increases commercial vehicle registration fees by various amounts depending on the class of vehicle.
The increase will push combined state and local sales taxes to 9.25 percent in Shelby County and 9.75 percent in about 30 counties - among the nation's highest.
Several lawmakers assailed the sales tax as regressive. "Many people say the sales tax is the fairest tax there is. But with a 10 percent sales tax on food for babies but not for horses, on milk bought by poor mamas but not on rich lawyers hired by richer foreign corporations, on the necessities of life but often not on the luxuries, the sales tax is anything but fair," argued Sen. Roy Herron (D-Dresden), who voted against the plan.
(DUH DIDN'T HERRON WHO NEEDS BOUNCING READ THE FINE PRINT THE SALES TAX IS NOT BEING INCREASED ON FOOD AND MILK FOR BABIES)
In the House, Rep. Frank Buck declared, "The lobbyists wrote this from one end to the other because they were terrified that we'd pass CATS." Buck (D-Dowelltown) was a sponsor of the hodgepodge CATS plan, whose business taxes, alcohol and tobacco taxes were larger than that of the sales tax bill.
Lobbyists came up with the proposal in part to fend off the CATS plan because they were convinced that Naifeh's tax reform measure would not pass and the General Assembly would need an alternative. When it passed the House, lobbyists erupted in a cheer as they watched the vote on the monitors outside the chamber.
The 1-cent measure squeaked through in the House with the reluctant votes of four of the state's most steadfast tax-reform advocates: Speaker Naifeh, Finance chairman Matt Kisber (D-Jackson), Rep. Ronnie Cole (D-Dyersburg) and Republican Leader Steve McDaniel (R-Parkers Crossroads).
"It was one of the most difficult votes I've ever made," said Kisber. "In my position as chairman of the committee, I felt I had to help facilitate whatever it took to get our employees back to work and our colleges open again and to stop the madness we've all been through for the last 72 hours." Kisber said he's disapointed that he did not achieve his goal of giving the state a more adequate and modern tax system. "I just hope the new governor and the new legislature understand that they'll be dealing with this same problem within 24 months."
"If you care about this state, sometimes you have to cast certain votes that you might not agree with," said Cole. "It really is contrary to my philosophy of what our tax system needs to be in this state."
Sen. Roscoe Dixon (D-Memphis) argued successfully to keep the current sales tax rates on grocery food.
Early in the day, Sundquist reluctantly endorsed the sales tax-based compromise, saying that as a matter of political reality, there was no other choice that would get the state's 22,000 furloughed workers back to work quickly.
"It's the only alternative," Sundquist said, acknowledging defeat in his four-year quest to reform the state's antiquated tax system. "Everything else has between 40 and 45 votes in the House and it's time for us to work for a conclusion."
After the final vote, Sundquist said, "We've been able to find common ground. I will sign this legislation so that state government can return to business as usual and provide the services Tennesseans rely on. There are elements of this revenue bill I don't like very much, but that is what compromise is about.
"I am disappointed that after 3d years of discussion and debate, we were unable to find a long-term solution to our budget problems."
On the House floor, sponsors of the sales tax measure fended off more than a dozen proposed amendments designed to earmark funds or to change the tax measure itself. The House rejected measures that would have shifted transportation funds to give raises to state employees, and earmarked funds for long term care programs. Even House sponsor Rep. Charles Curtiss (D-Sparta) said the plan will not be adequate to fund state government for more than a year or two.
Tennessee will also have the distinction of having among the highest combined state and local sales tax rate in the country, far higher than all of its neighboring states. The revenue estimates in the bill reflect the assumption that the higher taxes will drive some retail sales across the state line and to the Internet.
Some complained that the bill raises too much money. "We're treating this like it's monopoly money," said Rep. Tre Hargett (R-Memphis), who tried to eliminate the proposed increase in the professional privilege tax.
Contact Nashville Bureau reporter Paula Wade at (615) 242-2018 or bureau chief Richard Locker at (615) 255-4923.
Teacher, employee raises only new spending; TennCare cut
By Paula Wade wade@gomemphis.com July 4, 2002
NASHVILLE - Lawmakers cut more than $400 million out of Gov. Don Sundquist's budget Wednesday night, holding most state services at current levels but granting a modest pay raise to state employees and teachers.
The state's budget, spending $9.46 billion in state tax revenue and $7.47 billion in federal funds, passed both houses late Wednesday night after the House and Senate agreed on a sales tax increase package expected to raise $933 million in new revenue.
Of that amount, $865 million was needed to make up for the state's $477 million deficit, fund state services at present levels and to fund essential additions required by court orders and other mandates. The remaining new revenue was used to fund state employee salary increases and to begin replenishing the state's depleted Rainy Day Fund with a $24 million addition.
"It's a status-quo budget with pay raises," said Sen. Jim Kyle (D-Memphis). "City and county officials can rest easy tonight knowing that we didn't take their money. And it ratifies that spending is not out of control since the House Finance Committee spent 156 hours in hearings on budget cuts that went absolutely nowhere."
Under the budget bill passed Wednesday, K-12 teachers and higher education employees will get raises of 2 percent, and other state employees get a 3 percent pay raise effective Jan. 1. The measure also pays the salary of the 22,000 employees who were furloughed on Monday. The budget bill passed 78-10, with some conservatives criticizing the inclusion of state employee raises.
"It's the first time we've had a pay increase that keeps pace with inflation in seven years," said Tennessee State Employee Association executive director Linda McCarty. The most significant reduction in state services will be in TennCare, where the state's new TennCare waiver and the funding level in Sundquist's budget will make about 100,000 current TennCare enrollees ineligible for the program. TennCare provides the insurance coverage for 1.4 million Tennesseans. MY NOTE SINCE WE HAVE STATE EMPLOYEES, 6,000 DEAD PEOPLE, INELIGIBLES, ILLEGAL'S AND PRISON INMATES ON TENNCARE THIS MIGHT JUST GET A FEW OF THEM OFF THE ROLLS)
The measure also grants extra funding to higher education to keep college tuition increases at 7.5 percent or less. In recent years, the state's colleges and universities have had to raise tuition by double-digit rates - so high that the state's tuition-savings program, called BEST, couldn't keep up with program obligations.
The budget passed late Wednesday held good news for the state's cities, counties and school districts, who were set to lose hundreds of millions in state funds under the no-new-taxes budget proposal hammered out by the House Finance Committee because of the stalled budget talks. Across the state, local school boards and governments have been waiting on the General Assembly so they could finalize their own budgets for the fiscal year that began four days ago.
But as the stress of the immediate tax crisis melted with Wednesday's passage of $933 million in new revenue, House members began offering their own amendments to the budget bill, almost all of which were defeated immediately. One pet project did get funded by special amendment - as it has throughout the state's four-year budget crisis - the $2 million extra allotment to the Boll Weevil Eradication program. The Boll Weevil program is a favorite of Lt. Gov. John Wilder (D-Somerville), who is a cotton ginner and grower.
Tennessee General Assembly passes $933 million tax hike
By TIM WHALEY
With strong support from local legislators, Tennessee's General Assembly ended the state shutdown Wednesday evening by approving a $933.2 million tax increase that pays the bills incurred the past few years but provides few improvements in state services.
The measure imposes a 1 percent sales tax hike on the existing tax base except for food, hits businesses for $200 million, and raises the professional privilege tax to $400 annually on more than 40 professions.
Other measures increase the tax on cigarettes by 7 cents, while sin taxes jump 10 percent on beer, wine and liquor as well as smokeless tobacco.
Also in the bill - approved in the Senate by a 22-11 vote and in the House by a 50-41-1 vote - commercial vehicle registration fees would be increased by $8.1 million, the single-article cap limiting local sales taxes would double to apply to the first $3,200 of a single purchase, and the sales tax will be applied to vending machines and coin-operated amusements.
Area representatives voting for the bill include: Reps. David Davis, R-Johnson City; Steve Godsey, R-Blountville; Jason Mumpower, R-Bristol; Bob Patton, R-Johnson City; and Zane Whitson, R-Unicoi.
Rep. Ralph Cole, R-Elizabethton, did not vote.
In the House, Republicans overwhelming supported the measure, with 31 Republicans and 19 Democrats voting yes.
Senators from the region voting for the measure include Sens. Rusty Crowe, R-Johnson City; Ron Ramsey, R-Blountville; and Micheal Williams, R-Maynardville.
In the Senate, 10 Republicans and 12 Democrats voted yes.
"In my opinion, this vote had to be cast to avert a complete shutdown," Godsey said. "It got 50 votes exactly. I did not like the bill, I did not like the sales tax portion at all, but in order to avert a complete government shutdown and an income tax, this vote had to be made."
Mumpower agreed, saying the budget cut $450 million from Gov. Don Sundquist's proposed plan.
"Quite simply, it boils down to this," Mumpower said. "With the situation we were in, we were headed for a high-rate income tax, a complete government shutdown harming our families and the economy across the state, or we were headed for a middle-ground compromise plan.
"This isn't the prettiest solution to anyone, but it recognizes that in the economy we've been in - and with the situation we've been in using nonrecurring funds for recurring expenses - there were bills to be paid this year and next year."
Mumpower also stressed that the completed appropriation bill will fund higher education at 99 percent of the formula, a "major improvement" from the 85 percent funding level this year.
Also, state employees will likely get a 3 percent pay raise, with teachers at all levels getting 2 percent. But those increases only take effect Jan. 1
Davis said the plan, authored by state Sen. Jerry Cooper, D-Morrison, represented "common sense" policy.
"There were plenty of things that could have been done if anyone was listening to reality. But unfortunately, this thing became so mixed up in politics this session, with income tax proponents trying to do the Connecticut plan, a lot of better options were taken off the table," Davis said.
Sentiment among Senate supporters was much the same as in the House.
Ramsey said he had no choice but to vote for the plan, even with a 1 percent sales tax hike instead of a unified state and local rate at 8.75 percent.
"The sales tax was one of the places I had to compromise," Ramsey said. "The bottom line is, every senator could tinker with the bill and make it better in their own mind. But this is as responsible a compromise as we could come up with. My only disappointment is we could have done this last week and averted a state shutdown."
While limiting the ability of local governments to raise sales taxes given a combined rate of 9.5 percent to 9.75 percent in most locales, the budget avoids cutting local government revenues and holds state employees harmless from the lost workweek.
"This was a hard vote to make," Williams said. "I don't generally vote for tax increases of this size. But this year, we finally aligned our recurring expenses to recurring revenue, ending the structural deficits. For that reason alone, it's a better budget than last year.
"And if we didn't do this, basically, we would have been voting to shut down government ... and then have had to come back in special session to fight the income tax fight all over again."
Not every local legislator voted for the plan, or saw it as a victory.
State Rep. Ken Givens, D-Rogersville, a solid income tax supporter, voted "no" on the measure.
"They just voted to tax the little guy," Givens said. "Instead of taxing the people who have the money to pay the taxes, they voted to tax small businesses and middle-income citizens.
"I told all the House members on the floor that I didn't really think any of their opponents would ever use the fact that they voted for a $930 million tax increase like this against them in an election campaign, but I would just defer to their campaign managers for more advice on that."
Dear Friends:
Recently, I began searching for answers to accounting practices that affect the use of surplus funds. Apparently, many state departments and agencies are taking surpluses at the end of a budget cycle and transferring them on paper into asset accounts. This appears to be a standard practice and once the funds are placed in asset accounts they become investments and do not appear as taxpayer dollars in the budget for the next fiscal year. This is a legal accounting practice; however, I believe any and all surplus funds belong to you, the taxpayers of Tennessee. Surpluses should be returned to the General Fund so they can be used as revenue or rebated to you. They should, at the very least, be applied to budget shortfalls before we ask the citizens of Tennessee to pay more taxes to fund state government or shut it down as occurred this week for the first time in our history.
I have written two letters to our Finance Commissioner, Warren Neel, asking for specific information regarding surplus funds in accounts labeled “Designated Reserves” and “Undesignated Reserves.” To date, I have not received satisfactory answers from him. I addressed this matter in a Republican caucus meeting and twice on the floor of the Senate. Each time I asked the members to research the use of these funds. So far, my colleagues have not responded.
I inquired and received a response from John Morgan, our State Comptroller. However, it is vague and claims it will take additional time for his staff to provide answers to my inquiry.
If there is truth to the information I have received regarding the departments and agencies hoarding taxpayer funds to cushion their own excessive spending, I want a thorough, independent audit of our accounting practices with the complete report published for every citizen to read. The lack of responses and specific answers regarding reserve funds causes me a great deal of concern and emphasizes the immediate need to question accounting practices being used by the State of Tennessee.
Now, I am asking you for your help in this matter. Please contact your Senators and State Representatives and ask them to demand answers to the use of surplus and reserve funds that are in reality your money!
If there is any amount at all in any reserve funds anywhere, the right thing to do is to use it wisely as you have entrusted us to do. Rather than raise your taxes, these funds should be applied toward balancing the budget. This money belongs to the taxpayers of Tennessee.
Sincerely,
Curtis Person, Jr.
615-741-2419 or 800-449-8366 ext 12419 or TN GENERAL ASSEMBLY
I doubt it. These politicians have no idea how much shopping will shift to surrounding states border towns. Hey, I'm all for this, being in Kentucky. The increased revenue here will help dampen some of our Governor and Democrat legislators seemingly endless drive to raise our taxes. Tennessee money spends just as good as ours!
Beware!
from his pictures, boss hogg naifeh will feed off of anything, solvent or otherwise. a stake through what passes for his heart and a good dose of sunlight will cure what ails him.....
9.75 percent: Bedford, Benton, Carroll, Chester, Clay, Cocke, Crockett, Cumberland, Dickson, Dyer, Grainger, Greene, Hawkins, Haywood, Henderson, Houston, Jackson, Lake, Lauderdale, Lawrence, Madison, Obion, Pickett, Putnam, Rutherford, Smith, Unicoi, Van Buren, Wayne and Weakley.
9.50 percent: Decatur, Fentress, Giles, Hamblen, Hardin, Lewis, Lincoln, Montgomery, Moore, Overton, Perry, Roane, Sevier and Washington.
9.25 percent: Anderson, Bledsoe, Blount, Bradley, Campbell, Carter, Cheatham, Claiborne, Davidson, Fayette, Franklin, Gibson, Grundy, Henry, Hickman, Humphreys, Jefferson, Knox, McNairy, Macon, Marion, Marshall, Maury, Monroe, Polk, Rhea, Robertson, Scott, Sequatchie, Shelby, Stewart, Sullivan, Sumner, Tipton, Trousdale, Union, White, Williamson and Wilson.
9 percent: Coffee, Hancock, Hardeman, Loudon, McMinn, Meigs, Morgan and Warren.
8.75 percent: Cannon and Hamilton.
8.50 percent: DeKalb and Johnson.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.