TN TAX BATTLE RED ALERT TALK JOCKS CALL OUT TROOPS TODAY: Still no budget; House kills CATS

Still no budget; House kills CATS Naifeh backs off plan for immediate vote on income tax

By Tom Humphrey, News-Sentinel Nashville bureau July 3, 2002 NASHVILLE - The House on Tuesday night scratched "CATS," a patchwork of tax increases, while House Speaker Jimmy Naifeh backed away from an income tax vote.

At one point, Naifeh had agreed to put his 4.5 percent flat-rate income tax plan, which fell five votes short of passage in May, to a vote two hours after action on the CATS package.

Instead, he announced late in the evening that there was not enough support for his proposal and canceled the effort.

"Things just did not happen the way we thought they might," he said, refusing to rule out an effort later this week.

He noted that two income tax supporters, Democratic Reps. Barbara Cooper of Memphis and Shelby Rhinehart of Spencer, have been hospitalized and were not on hand Tuesday night. (MY NOTE: Mr Rhinehart had a stroke according to Steve Gill he is BRAIN DEAD)

CATS, the acronym for Continuing Adequate Taxes and Services, was debated for three hours before a vote.

The result was 47 votes for the bill - three shy of the 50 needed for passage. Twenty-eight Republicans and 19 Democrats backed the bill.

Forty-five representatives voted against the bill, including 32 Democrats and seven Republicans. Three representatives, all Republicans, abstained.

Rep. Frank Buck, D-Dowelltown, said the defeat of CATS was by such a small margin that it might have another life, especially if other tax proposals fail with the state under a partial government shutdown.

"We understood we were on the razor's edge," said Buck, who said the measure was a "life preserver" intended to rescue the state from "a moment of peril."

In the version brought to the House floor, CATS included 23 provisions raising $742 million in new revenue through various means.

The biggest revenue generator effectively set a statewide uniform sales tax rate at 8.75 percent. Currently, the state applies a 6 percent rate while local governments may add another 2.75 percent.

Only about 30 of the state's 95 counties, however, apply the maximum 2.75 percent rate. The state average is 2.4 percent and in Knox County the rate is 2.25 percent.

Under the bill, the state would raise the rate to the combined maximum of 8.75 percent and keep the new money raised in areas where the local rate is less than 2.75 percent. In Knox County, for example, the combined rate would rise from 8.25 percent to 8.75 percent and the state would keep the revenue from a half-cent per dollar increase.

Statewide, the provision would have raised $248 million for the state but critics claimed it was unfair since people in some areas would be paying more of their sales tax money to the state than those in others.

Rep. Gary Odom, D-Nashville, attempted to amend the uniform rate out of the bill and substitute a one-fourth penny-per-dollar sales tax increase, coupled with a $118 million raid on the state's highway fund. His proposal was defeated 53-21.

Other provisions of CATS include an increase in the business excise tax rate from 6 percent to 6.75 percent, technical changes in business tax levies to produce more revenue and higher taxes on alcohol, tobacco, cable and satellite TV, newspapers, club memberships, film rentals, vending machines and coin-operated amusement devices.

The bill was strongly opposed by lobbyists for businesses that would be affected by higher taxes. Several legislators, most of them advocates of a state income tax, also said the measure does not raise enough revenue to avoid some cuts in current programs.

Buck said, though, that it would eliminate the current crisis, fully fund education at current levels and avoid the cuts needed under a no-new-taxes budget.

Gov. Don Sundquist, meanwhile, tossed another idea onto the Legislature's tax proposal pile and called for compromise. The governor also declared himself ready to sign "any reasonable revenue package that comes to me," including a sales tax increase that he once vowed to veto.

Sundquist said that he would not, for now, sign a no-new-taxes budget. But he declined to rule out that possibility if the legislative stalemate continues through Friday, when the current five-day stopgap state budget expires.

The stopgap budget leaves 22,000 general government employees and almost as many higher education system workers on furlough. Many government services have halted.

Legislative leaders, who had at least two private meetings during the day in hopes of easing escalating House-Senate hostility, said they would push hard to bring one or more tax plans to a floor vote today.

The centerpiece of Sundquist's new proposal is a 1 percent flat-rate income tax that would take effect next Jan. 1 with voters deciding in 2004 whether it would be raised to 3.5 percent. The 1 percent income tax would be coupled with about $550 million in miscellaneous tax increases to generate about $1 billion.

"My friends, if ever there was a time for compromise, it is now!" Sundquist said. "None of the revenue proposals thus far has enough votes in both houses to pass."

The governor's plan was outlined only in general form. For example, the miscellaneous tax package was not detailed. He mentioned alcohol, tobacco, business income, licensed professionals and coin-operated amusement devices as targets for increases.

Under the governor's plan, the state sales tax would increase from 6 percent to 7 percent on Aug. 1. The increase would expire on Jan. 1, when the 1 percent income tax would begin.

In August of 2004, voters would decide whether to call a constitutional convention on state taxes. If they voted not to, the income tax would increase to 3.5 percent on Jan. 1, 2005.

At the same time, the sales taxes on grocery food, nonprescription drugs and clothing would be repealed along with the present Hall income tax on some dividends and interest.

If voters approved the call, delegates would be elected in November 2004 and the convention recommendations submitted for a follow-up statewide referendum in 2006.

Morning and afternoon sessions of both the House and Senate were devoted to speeches expressing frustration over the continuing deadlock. In the Senate, a major secondary theme was blaming the House for failure to approve any of the tax bills passed by the Senate.

The Senate this year has approved four tax proposals, ranging from an increase in the state sales tax in April to a plan approved Sunday that would have given voters an option between a 3.75 percent income tax and an increase in sales taxes to the 10 percent range. The House has spurned all four proposals.

"I think they (House leaders) are just stalling to the point where we can't do anything but pass an income tax or cut the budget," said Sen. Randy McNally, R-Oak Ridge, deeming those options "equally intolerable."

"This is absolute nonsense!" declared Sen. John Ford, D-Memphis, who returned to the Legislature after an absence Monday. "I don't know who's playing this game the best, the House or the Senate."

In the House, Deputy Gov. Alex Fischer and members of the Sundquist cabinet gave reports on the floor of problems in dealing with the partial government shutdown.

"We beg for your help to put an end to the madness," said Fischer in his speech. "We can't wait until Friday to act. ... We need a compromise and we need it today."

Education Commissioner Faye Taylor said school systems across the state were already suffering from legislative inaction, which has left them unable to make plans for the coming school year.

The latest no-new-taxes plan cuts $203 million from kindergarten-through-12th grade education, which Taylor said would require assigning an extra five students to each class statewide and laying off 7,500 teachers. MY NOTE do the math there are 95 counties and only $203 in cuts)

Leaders have told legislators to be prepared for meetings tomorrow. Ford, however, declared on the Senate floor that he would not attend a July 4th session because "I have a right to be with my kids and I don't care who doesn't like it."

Thanks Nora to all of you for your efforts. All of us working as a team cannot be stopped by the likes of Naifeh.

Here is one you will all love. WSMV-4 Nashville reports how legislators who live only 2 miles from the Capitol get $10,000 per year in per diem pay for travel and food!

WSMV-4 Nashville: Tennessee Representative Rob Briley's house is a straight shot to the capitol. He lives in East Nashville, about two miles from his office at Legislative Plaza.

Yet when the legislature is in session, or when he's in his office working on official business, he collects $82 a day for hotel expenses, and $42 a day for meals. So far this session, Briley has collected $9,979 in travel expense money, regardless of the fact that he does not sleep in hotels.

Channel Four's I-Team found that taxpayers have paid more than $113,000 to lawmakers who live in Davidson County for travel expenses they did not occur, including money for hotels they didn't sleep in. And it's all legal.

Representative Mike Turner collected $9,592 from the taxpayers for meals and unslept in hotels. He lives 14 miles from his legislative office. The payment is called a per diem, a daily allowance.

The flat rate of 124 dollars a day is set by the federal government. It's based on how expensive each city is for a night's stay. Lawmakers in every state get a per diem, although many in the local delegation can't explain exactly why they deserve one, when they sleep at home.

"When they set it up years ago, who knows why they did it. I don't know why they did it. They did it a long time ago. It's always been that way," says Turner.

Edith Taylor Langster collected the most of anyone in the Davidson County delegation: $10,576 despite the fact that she lives two and a half miles from her office and isn't sleeping in hotels during the session.

"No ma'am, I'm not," says Langster, "But I do have office work and office business to discuss and to be present for. And this is money that I can claim as a legal expenditure."

Many lawmakers, like Briley, consider the per diem a supplement to their paycheck. "The per diem is part of the legislative compensation package that all legislators receive," says Briley.

Their salary is $16,500 a year. As Briley points out, that's below minimum wage for many, given the hours they put in. But in these tight budget times, when every penny counts, the I-Team asked lawmakers why they don't decline the money, since it's meant for hotels they don't use?

"First of all it would make all my colleagues look bad if I chose to do that," says Representative Gary Odom. "The next question that a reporter would ask is, rep so and so is not taking any compensation for serving, why are you?" says Odom.

He was surprised to learn that Senator Doug Henry does not accept a per diem check. "Well, that's great. I was not aware of that," says Odom. Senator Doug Henry, in fact, has been returning his per diem check to the state since 1973, when a newspaper editorial questioned why local lawmakers get per diems.

Henry tells the I-Team, "I thought about it, scratched my head, said, you know, I never thought about it before, he's right. So since that time, I've been paying mine back."

There is a slight difference between the lawmakers who live close and those who live far. Those who live within 50 miles of the capitol have to pay income tax on their per diem. Those who live further out are entitled to collect mileage reimbursement at 32 cents a mile. For this session, at least, the per diem gravy train has come to a stop. By law, lawmakers can only collect per diem for 90 days. On June 19th, they began working for free. The long-standing budget impasse was resolved two weeks later.

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