TN TAX BATTLE: More battles inevitable, but is income tax?

The Commercial Appeal ^ | 7/7/02 | Richard Locker

[GailA]

Shutdown could shadow election

Ghost of Legislature's taxing conflict may haunt the halls of politics

By Tom Humphrey, News-Sentinel Nashville bureau July 7, 2002

NASHVILLE - While the Legislature arguably restored state government to fiscal status quo with a $933 million tax measure, the political landscape may be in for further upheaval as a result.

The General Assembly's vote to give Tennessee one of the highest sales tax rates in the nation - up to 9.75 percent when state and local levies are combined - appears likely to have considerable influence on the campaigns for governor and legislative seats. It could bring challenges within the Legislature to the leadership of House Speaker Jimmy Naifeh and Lt. Gov. John Wilder, who presides over the Senate.

The infusion of new revenue means the state will have enough money for basic services without any further tax increase for two or three years, according to state Comptroller John Morgan. Assuming, that is, that the economy is stable.

It also assumes no new programs with a substantial price will be launched, which could leave the state behind its neighbors in spending on areas ranging from education to home-based care for the elderly. Advocates for such causes lamented this and promise to step up their efforts in the future.

Retail merchants, especially in border counties, fear the sale tax increase will drive business to other states or to the Internet. Dr. William Fox, head of the University of Tennessee Center for Business and Economic Research, has estimated that a percentage-point increase in the sales tax translates into about $1 billion in lost sales for Tennessee merchants.

Still, the reaction to the Legislature's tax vote in many quarters could be summarized in a simple sentence: "It could have been worse."

That refrain echoed from state workers, teachers, university students and others terrified by the prospect of a complete government collapse on the heels of a partial shutdown. It was mouthed by lobbyists for various special interests that could have been hit harder by alternative tax increases under discussion.

Perhaps most of all, that opinion was repeated by opponents of a state income tax, including many legislators.

"It was the best option available to keep our government serving our constituents and it wasn't an income tax," said state Rep. Beth Harwell of Nashville, who is also chairman of the Tennessee Republican Party.

Combining votes of senators and representatives, Republicans voted 44-14 for the largest tax increase in Tennessee history. Twenty-eight Democrats voted for it, while 37 were opposed.

Proponents of tax reform based on an income tax also joined the could-have-been-worse chorus. They included Naifeh and Gov. Don Sundquist, two of the state's most prominent tax reform advocates. Naifeh voted for the final package while Sundquist lobbied in support of it, both after effectively pronouncing the income tax dead.

Curiously, most advocates of an income tax say the effort is probably dead for the foreseeable future while opponents see it as still on the table.

"I think the entire situation made it clear that the income tax is not going away," said Frank Cagle, communications director for Republican Van Hilleary's gubernatorial campaign. "It's obvious you're going to have to elect somebody who's committed to reducing spending, reforming TennCare and against an income tax."

Hilleary, apparent front-runner for the Republican nomination, has made opposition to the income tax a centerpiece of his campaign. Democratic front-runner Phil Bredesen also repeatedly declared his opposition, though perhaps with less ardor.

Dave Cooley, senior strategist for Bredesen's campaign, said the vote opens the governor's race to discussion of other issues while the new revenue "gives the new governor a chance to make a great difference if he has management skills and experience."

Other Democrats contend that the new lay of the political land benefits their party generally.

"I think people realize the income tax is dead now, and that takes it away as an issue," said Sen. Steve Cohen, D-Memphis, who supported an income tax.

Though the issue has crossed party lines, Democrats in the Legislature have generally been more likely to support an income tax. Now that it's dead and a Republican-supported sales tax increase is in place, backing the new levy could become the focus of more voter resentment, according to the theory.

Cohen, a leading crusader for a state lottery, also contends that the new situation enhances prospects for a lottery being approved in November.

A Tennessee lottery, he says, would lessen the sales tax "leakage" to other states. As things stand now, he says, Tennesseans drive to other states to get lottery tickets and while there, they buy items they would otherwise have purchased in Tennessee. If the lottery buffs buy tickets at home, they are less likely to spend time and gas money going to states with lower sales taxes, he says.

Voters will provide some answers on the political impact of the tax situation in the Aug. 1 primary elections and considerably more in November.

One of Bredesen's primary opponents, Knox County District Attorney General Randy Nichols, openly supports an income tax while another, former state Education Commissioner Charles Smith, will not rule it out.

Jim Henry, former state House Republican leader and Hilleary's leading opponent, opposes an income tax but has repeatedly denounced Hilleary for contending the state has no fiscal problem.

Both Bredesen and Hilleary have downplayed the state's fiscal problems generally. The new revenue may make their contentions, ridiculed as ludicrous by primary opponents, seem more accurate and solidify their front-runner status.

Fourteen legislators are not seeking re-election to the seats they now hold and another, Rep. Keith Westmoreland, R-Kingsport, recently killed himself. That means at least 15 freshmen, 13 in the House and two in the Senate, in the 103rd General Assembly; more if any incumbents are upset.

And many incumbent legislators face serious competition, though there are only a handful of such contests in the Aug. 1 primaries.

Among the incumbents with serious opposition in primaries are Sens. Tommy Haun, R-Greeneville; Randy McNally, R-Oak Ridge; Jeff Miller, R-Cleveland; and Douglas Henry, D-Nashville; and Reps. John White, D-Lawrenceburg; Paul Phelan, D-Trenton; Zane Whitson, R-Unicoi; Ralph Cole, R-Elizabethton; Jamie Hagood, R-Knoxville; and Joe Kent, R-Memphis.

Of those, the income tax is an issue in the case of Haun, McNally, Henry, White, Phelan and Cole. White, Phelan and Cole voted for it this year, while opponents characterized Haun and McNally as income tax supporters. Henry, on the other hand, is attacked by his opponent for not supporting an income tax.

November is likely to see several races with the income tax as an issue, but one notable confrontation may not occur after all. Senate Speaker Pro Tempore Bob Rochelle, D-Lebanon, a leading income tax advocate, announced Friday he is suspending his campaign and considering dropping out of the race after his wife received "another violent, threatening phone call."

He also declared his disappointment in the Legislature's vote to raise the sales tax.

"All Tennesseans are going to feel the crush of this increased tax," he said. "As these working families learn to deal with the stress of having to make ends meet while others get away without paying their fair share, my family is learning to cope with the stress of having people threaten my wife and my children."

Rochelle is unopposed in the Democratic primary and Rep. Mae Beavers, R-Mount Juliet, has no opposition for the GOP nomination to face him in November. Rochelle has characterized her as a "do-nothing" because she has voted against all tax increases.

The long-running stalemate over the budget and taxes has apparently lowered public esteem for legislators. One recent poll indicated less than 10 percent of Tennesseans think the Legislature deserves a favorable rating.

If that held true, it could enhance prospects for incumbent defeats. But legislators argue that the resolution of the budget crisis, coupled with the traditional phenomenon of people liking their legislator while disliking the institution, should eliminate any major anti-incumbent sweep.

Tom Humphrey may be reached at 615-242-7782 or humphrey@edge.net

[meyer]

What we really need is to get the liberal press to acknowledge that there's a major spending problem. Revenues have been adequate for years, until the Clinton decade when suddenly, states decided it was time to go on a spending spree. This has to be made more public. The voters have been duped long enough.

Its odd; I've only been in Tennessee just over a year and I can see the obvious press bias here, just as clearly as I saw it in Ohio.

[patton]

Somebody needs to find a way to change the question, from "Should the state (feed the hungry, care for the elderly,...)" to "What percent of your income is the state entitled to?"

Until that question is raised and resovled, all you are going to get is perpetual creeping socialism.

[meyer]

Excellent point!

[JDGreen123]

Absolutely. I would say our largest papers in this state are every bit as liberal as anywhere in the country. The Tennessean is owned by the Gannett Corporation. They go to the Eastern Liberal journalism schools and hire grads by the truck load. They then farm them out to their papers across America.

I canceled my subscription to that rag (Tennessean). If you want real news, you will find it on the Internet at places like this one. The final straw was listening to an interview with the Tennessean's "Diversity Co-ordinator." The things she said about their policies were so outlandish but confirmed what I already suspected.

About the only purpose these "papers" serve is to let us know what the enemy is planning so we can cut them off at the pass. Glad to have you here in Tennessee!

[GailA]

When the libs/socialist whine about the higher sales tax and that they are going over into a neighboring state to avoid paying the higher sales tax on items. Ask them "Why are you dodging paying YOUR fair share? Why are you depriving the Children of Tennessee of YOUR FAIR share of the sales tax dollars?

This is what they accuse us of so why not TURN THE TABLES ON THEM.

[GailA]

The socialist press will NEVER acknowledge we have a spending problem. They only listen to the likes of spendquist, boss hogg, boss hogg II, and roach-elle. They NEVER listen to Mae Beavers, Marsha Blackburn or Donna Rowland. Oh, you might get a sound bite, but that is to make it appear on the surface that they are unbiased.

[GailA]

Even conservative Republican Sen. David Fowler of Chattanooga, an income tax opponent, told the Senate Finance Committee last month that an income tax is "inevitable."

We also need to find some REAL"conservatives" with MORE backbone than Fowler.

[GailA]

Might want to print out the list of PORK college building's I've posted along with Sen Person's letter.

HOBBS and begin handing them out.

WE need to do a major education campaign about the PORK in the budget. Folks have to decide whether they want a third $19M swim facility on a college campus or pay the K-12 teachers better. Whether they want to pay for another multi-million dollar sports facility on a campus that already has 5 or pay the Profs better. Do we need a $25M parking garage for the Grizzlies prima donna ball players to park their Lexus and Navigators in air conditioned comfort or better health care for the elderly?

WE don't seem to learn to play the game the socialist play. WE know our facts, but don't seem to be able to translate and turn the tables on the socialist with their own logic.

From dealing with my boys I learned you have to give them options, in this case which is better spending $1.5M on a wild flower to make a median look pretty in honor of Veterans OR spending that money on acutal Veterans needs.

[the bottle let me down]

It's my understanding that the state supreme court ruled that the income tax was unconstitutional in the 1930s. Is this correct? If so, why do opponents think that an income tax woudl be OK now? Has the constitution been changed? Are they trying to change it? Or are they merely betting that the court will reverse itself on the question?

[Ancient_Pistoll]

>>Hours later the General Assembly approved a 17 percent increase in the state sales tax<<

That is going to be the pro-income tax talking point from here on out. It is a sinister way of saying they increased the State portion from 6 cents to 7 cents.

[Ancient_Pistoll]

>>It's my understanding that the state supreme court ruled that the income tax was unconstitutional in the 1930s. Is this correct? If so, why do opponents think that an income tax woudl be OK now? Has the constitution been changed? Are they trying to change it? Or are they merely betting that the court will reverse itself on the question?<<

Yes, the SC ruled it was unconstitutional in the '30s, they also ruled that way twice in the '60s.

There was a bill that passed the Senate but lost in the House that would have created a Constitutional Convention, to decide the issue.

They believe now that the Court will reverse those previous decisions. Of course, then we the voting public could vote them out.

[No Income Tax]

According to a national report distributed in the Senate last week, Tennessee ranked fifth-worst among the states in the regressivity of its tax structure even before the change. That's because the state taxes 12.3 percent of the income of the poorest 20 percent of its people, according to the report, while the top 1 percent in income pay the equivalent of 3.6 percent of their income in taxes.

Let's see--the state taxes 12.3 percent of the income of the poorest 20 percent. Does that mean the remaining 87.7 percent of the income is not taxed?

[shootist]

bump

[the bottle let me down]

Thanks for the info. I have a real problem with legislators who are counting on the court to reverse itself rather than doing the honest thing and trying to change the state constitution.

[GailA]

The court over the past couple of decades has been STACKED with pro-income taxers, thus the socialist like scumquist can now insist that an IT is Constitutional.

[shootist]

bump

[GGpaX4DumpedTea]

You moved from Ohio to Tennessee. About the same time you did that I moved from Tennessee to Ohio. I lived in Tennessee 7 years.

It is interesting to do a "material balance" on taxes if you want to compare taxes in Tennessee with other states. If you compare Tennessee taxes with a northern high tax state like Ohio or Nebraska (I moved to Tennessee from Nebraska), you will find some interesting things - I sold a home in Nebraska for $87,000 and on that home I paid about #2,200 per year in real estate taxes. I bought a home in Tennessee for $110,000 and paid $575 per year in real estate taxes. I paid about $2,200 per year in state income tax in Nebraska but none in Tennessee. I paid about 6% sales tax in Nebraska, vs Tennessee's approx 9%. In 1993 Tennessee was obviously managing income and expenses better than Nebraska (they were taking and spending less of MY money). Similar analogies to Nebraska exist here in Ohio, and Ohio still does not know how to manage MY money that they take from me. But like other states, they sure know how to spend it!

The underlying spending problem in Tennessee that no one wants to talk about is TennCare - free medical care for ALL but a very few. The Demonrats saddled the State of Tennessee with this evil monster, and no one in Tennessee seems to have the guts to call TennCare what it is. TennCare will bankrupt the state if it is not reined in by the pols, and if the pols won't do it, the people better before it is too late.

Ted and Hitlery would like to see us saddled with this same evil monster on the national level. Be warned - once this kind of socialism gets a foot hold, there is no stoping it!

[GailA]

How does a 1% increase in the sales tax become a 17% increase? This is puzzling.

[GailA]

I think they figure the taxes in relationship to amount of income. People who make less usually buy no-name or store brand product more often because they cost sometimes nearly half of the name brand item. Bread is a good example, usually store brand is about a $1, while the name brand is closer to $2. Wealthier folks as a whole tend to purchase name brand items thus paying more in sales tax. Same goes for clothes, wealthy people are wedded to the really high end designer clothes, while those less well off stick to Hillfiger or Ann Klien etc.

Median income in Memphis is about $25,000.