TN TAX BATTLE Record tax political bull's-eye Anti-spending Republicans wear it call it 'victory'

Record tax a political bull's-eye Anti-spending Republicans wear it and call it 'victory'

July 8, 2002 NASHVILLE (AP) - Republican lawmakers who voted for $933 million in new taxes - the largest tax increase in Tennessee history - expect to be targeted in this year's elections.

"I imagine that campaign mailers are being prepared as we speak," said Rep. Bobby Wood (R-Harrison), the longest-serving Republican in the Tennessee House. More than 60 percent of the House votes for the bill were from Republicans. About $600 million of this year's tax package will be generated from a 1-cent increase in the state sales tax.

The next-highest tax increase in Tennessee raised $281 million and was enacted in 1984 under former governor Lamar Alexander, a Republican, said state Comptroller John Morgan. All that money was raised through a sales tax increase.

Democratic leaders are aware of the part Republicans have played in the history of Tennessee taxation. "Isn't it strange that the two largest tax increases were under Republican governors?" asked state Treasurer Steve Adams, a Democrat.

Tennessee Republican Party chairman Beth Halteman Harwell, a state representative from Nashville, said it would be unfair to single out Republicans who voted for the tax bill. The bill passed the House 50-41, with 31 Republicans and 19 Democrats voting for it. Nine Republicans and 32 Democratic House members voted against it. It passed the Senate 22-11, with 12 Democrats and 10 Republicans voting for it, and six Democrats and five Republicans voting against it.

Harwell said the sales tax bill the General Assembly finally passed prevented an income tax. "This was, without a doubt, an absolute victory for the anti-income tax forces in this state," she said. "Every (no) vote on that board was for an income tax or shutting down state government. These Republicans indicated they were for responsible government. I think that vote helps those Republican legislators. The message that went out from that Capitol is we will not add another source of revenue to state government."

But Robert Swansbrough, a political science professor at the University of Tennessee at Chattanooga, said many voters would see a different message in the Republicans' tax vote. "They were seen as obstructing everyone," he said. "Rather than opting for the progressive solution, (Republicans) just added to the burden of everyone by passing a regressive sales tax increase. It makes them appear in support of a regressive tax and hypocritical, a dangerous combination in electoral politics."

The Republicans' vote "very clearly" is a campaign issue for Democratic challengers, Swansbrough said. Senate Majority Leader Ben Atchley (R-Knoxville) said the choices facing lawmakers were to cut the budget by about $1 billion, to enact an income tax or to pass the tax bill that was approved Wednesday and signed Thursday by Gov. Don Sundquist.

"We had a real problem," Atchley said. "I think what we did was responsible. It doesn't solve our long-range problems, but it does take care of it for a year or two."

House Minority Leader Steve McDaniel (R-Parkers Crossroads) said it is difficult to gauge how the vote for the tax increase will affect Republican campaigns.

"Those 31 Republicans stepped forward because they wanted to get the budget balanced," McDaniel said. "I think many of the Democrats recognized the need for tax reform, so they let the Republicans balance the budget under the old system." Both Shelby County's Republican senators - Curtis S. Person Jr. of Memphis and Mark Norris of Collierville - voted no, but four of the six Republican House members voted for the bill.

Voting yes were Rep. Paul Stanley and Rep. Larry Scroggs, both of Germantown, along with Rep. Tre Hargett of Bartlett and Rep. W. C. 'Bubba' Pleasant of Arlington.

Pleasant said the overwhelming majority of his Arlington constituents were against the income tax and that it was his duty to vote for the sales tax hike.

"When 90 percent of your people ask you to vote for something, I'm not going to go up there and say I'm smarter than 90 percent of the people I represent," said Pleasant, unopposed in both the primary and general elections.

Shelby County Republican House members voting against the bill were Joe Kent of Memphis and Curry Todd of Collierville.

Kent took a break Sunday afternoon from putting up campaign signs to say the vote should be a nonissue when the election rolls around.

"For 3 1/2 years we had some tough battles up there," he said. "The election is 3 1/2 weeks from now, and I don't see the advantage in that strategy (making a lawmaker's tax vote a campaign issue). It could hurt both sides." Kent is being challenged by Chuck Bates, 29, a radio network news director who has said he believes the state has a spending problem and not a revenue problem.

Some form of an income tax had been endorsed by Sundquist, House Speaker Jimmy Naifeh, Senate Speaker Pro Tem Robert Rochelle, Lt. Gov. John Wilder and McDaniel.

The income tax failed even with the array of state leaders who lined up behind it.

In the closing days of the legislature, Sundquist and Naifeh declared the income tax dead. Wilder, who supported a 6 percent income tax bill, never brought his bill forward for floor action. "I think that will weaken the chances of re-election for leadership," said Wood, of Harrison.

http://www.timesnews.net/index.cgi?CONTEXT=cat&BISKIT=1186382793&id=61971&category=63

Sales tax increase caps four years of contentious debate over income tax

By TOM SHARP Associated Press Writer

NASHVILLE, Tenn. - Gov. Don Sundquist set out four years ago to reform Tennessee's tax structure, easing the state's dependence on a sales tax by adding an income tax he argued reduced the burden on the poor and middle class.

He, and a dozen other legislators leading the income tax fight, were unsuccessful after four sessions and two special sessions filled with contentious, bitter debate. Tennessee remains one of nine states without a broad-based income tax.

The income tax came close to passing this year, but death and illness took away key votes at the end of the session and converts were not found to bridge the gap. Instead, lawmakers last week gave Tennesseans the highest tax increase in state history - $933 million - by raising the sales tax from 6 percent to 7 percent.

When the tax goes into effect July 15, Tennessee will have one of the highest sales taxes in the country. Most Tennesseans will pay between 9 percent and 9.75 percent on goods, excluding groceries, when local option taxes are added to the state rate.

Lawmakers who want tax reform said they were forced to vote for the increase to break a stalemate between the proponents and opponents of an income tax and end a three-day partial government shutdown.

"We ended up just adding to the taxes people are paying. It's very regressive and will break our system down even further," said House Speaker Jimmy Naifeh, who this year carried the torch for an income tax, sponsoring a bill to impose a 4.5 percent flat rate tax and to eliminate or lower other taxes. "I'm just very disappointed."

The sales tax bill contains no reform, said House Finance Committee Chairman Matt Kisber, who will not return next year after 20 years in office. The Jackson Democrat said the extended budget battles were a factor in his decision to not run for re-election.

"It's just adding higher rates to the existing taxes," he said. "The only thing it does in terms of the structural problem is appoint a commission to study it for a couple of years."

Sundquist, a lame duck Republican whose term ends in January, and others who envisioned tax reform saw their best hope still sitting on the desk of the House clerk when the session adjourned on July 4. A vote for the income tax fell five votes short on May 22.

The process polarized the citizenry and Legislature on how Tennessee should tax its citizens.

"Tennesseans will continue to discuss and debate all sides of the issue. I am pleased we brought this issue to the forefront. That is one of our most important accomplishments, and I am pleased the citizens are engaged, involved and interested in the role of state government," Sundquist said.

The tax debate escalated over the past four years. Two of the regular sessions spilled over into the next fiscal year when lawmakers could not agree on a budget by the start of the fiscal year, July 1. For two consecutive years, lawmakers worked more than two weeks for free, after the legally allotted 90 legislative days expired, to try and resolve the budget.

It was common for legislators to make their way to the Capitol through crowds of shouting, sign-waving, horn-honking protesters, and a line of state troopers holding them at bay.

"The income tax would have gone right on through if not for the protesters," said Bettina Scott, one of the die-hard demonstrators who answered the regular calls by conservative talk radio hosts to lead protests against the tax outside the Capitol.

The difference this year was the counter demonstrations by tax reform supporters, who camped out for nine days at the foot of the Capitol to show lawmakers that not all Tennesseans were against an income tax. (MY NOTE 30 is all they could muster on any given day)

"I've been working on tax reform since 1993, and this is the closest we've ever been," said Nell Levin, a member of Tennesseans for Fair Taxation. "Tennessee has to have tax reform or it is going to be like a Third World country."

When the debate began four years ago, the words "income tax" were rarely said aloud, more normally whispered or reduced to the euphemism, "do the right thing."

By May, when Naifeh, a Democrat, put an income tax to a vote, the fight was in full view and voice.

How the Legislature came so close to a significant change in the tax system before reverting to what one call "that old intoxicating mistress of the sales tax" is an example of high-stakes brinksmanship that led to the furlough of 22,000 state workers and the shutdown of much of state government.

After the income tax vote, the goal of the supporters for various revenue proposals was to have the last plan standing. Not until Naifeh announced Wednesday that he didn't have support for a second vote on his income tax plan did the dam burst. The sales tax increase passed less than 12 hours later.

Thirty-one of the House's 41 Republicans voted for the tax increase, as did 19 Democrats. A dozen members who risked their political careers in the failed income tax vote made the seemingly contradictory choice to raise the sales tax.

One is Rep. Rob Briley, a Nashville Democrat whose grandfather was a driving force in creating a metropolitan government in Nashville nearly 40 years ago and was its first mayor.

"I got to the income tax after about a year and a half of study. I came to realize that a broad-based personal income tax is the most reasonable, fair and efficient solution to the complex problems of this state," Briley said. "Because so much thought went into the process it became a very firm conviction."

He said he didn't want to vote for the sales tax increase when the income tax died.

"Too many people count on the government for too many things to run the risk of a full government shutdown," Briley said. "While the vote went against my conscience and beliefs and intellect, it was something I simply had to do."

The emergency spending power that kept the government operating was only good for five days. It would have expired at midnight Friday. The sales tax increase, and the budget that followed behind it, were approved barely 48 hours before the government was set to shut down.

"I could sense the dynamics of the situation becoming totally out of control, to the point where I believed if we had not passed that bill it would have caused great and irreparable harm to this state," Briley said. "It saddens me, but sometimes you have to make those kinds of choices."

Naifeh held out at least partly because he and other tax reformers were concerned it would be years before they would have another opportunity to pass the tax.

At least eight of the pro-income tax votes will not be back in the House next year due to retirements and one suicide.

Democratic Sen. Bob Rochelle, who was the leader of the income tax push until this year, said Thursday he may not seek re-election because he is tired of the fight and the threats to his family. His opponent, Rep. Mae Beavers, R-Mt.Juliet, is a strong income tax opponent. She also voted against the sales tax increase because she thinks cutting state spending is the solution.

The two top gubernatorial candidates, Democrat Phil Bredesen and Republican Van Hilleary, also oppose an income tax.

The tax debate will likely resume in some form within the next two to three years. More than half of the $933 million raised by the sales tax increase - $477 million - was used to cover spending approved in previous years and paid for with non-recurring sources of revenue.

"There was a recognition the state has passed bad budgets for three years, that there was a need for more revenue and no way to cut expenses to the extent necessary to balance the budget," House Republican leader Steve McDaniel said.

"Given that and the state party's position on an income tax, our members were willing to add to the existing tax structure," he said.

Rep. Tre' Hargett, R-Bartlett, said he believes the sales tax will last and the Legislature will not have to go through this debate again anytime soon.

But Rep. Bobby Sands, D-Columbia, said the state will have to do something else soon - it can't keep raising the sales tax every time it needs more money.

"The sales tax hurts the poor more than it hurts the affluent. The man who picks up your garbage will pay more taxes under this bill than those who wear the white collars to work. It makes an unfair code even more unfair," he said.

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