Gov. Bill Haslam expects to release a list of edits to his budget plan Monday, but is staying quiet about how he wants to spend an unexpected influx of taxpayer dollars collected by the state.
The governor did say he doubts there will be room in his $31 million budget for Lt. Gov. Ron Ramsey’s proposed cut in the “Hall tax” on income from interest and dividends.
“Cutting the Hall tax will probably not be a part of our amendment,” Haslam told reporters Friday at LP Field in Nashville after encouraging youth exercise.
Reducing the Hall tax is one of hundreds of millions of dollars worth of requests his office has received in recent weeks as state revenues grew beyond expectations, Haslam told reporters earlier this week, saying he’d like to plug the excess money into basic service programs that faced cuts or would be funded by one-time money.
“We’re working on the amendment to the budget, and we have very few dollars and we have about $600 million worth of requests,” Haslam said Thursday after speaking with the Tennessee Board of Regents in Nashville.
“We’re trying to go back where we can and address some things we didn’t, couldn’t fit in the budget the first time,” he said.
The Hall tax is a favored tax cut by the lieutenant governor, a Republican from Blountville. Ramsey is backing two proposals reducing the tax on income from interests on bonds, notes and dividends from stock for people over 65 years old — who are now exempt from the tax if they claim less than $26,200 in income as individuals or $37,000 as a couple.
One plan, SB2535, would raise the senior exemption level to keep pace with the rate of inflation, which would mean the state losing out on $1 million a year. The other, SB2536, would up the exemption by $1,000, in turn lowering state revenue collections by an estimated $88 million a year.
Tax collections on everything from buying alcohol, clothing and cars to taxes paid by corporations are up from this time last year, giving the governor $251 million more for the government to spend or give back to taxpayers than originally predicted.
In announcing his first draft of the budget, Haslam said stronger-than-anticipated revenue helped balance out $160 million in one-time federal money leaving the state budget.
But tax revenue has continued to grow beyond expectations.
“As revenues increase, some steps are being taken to reduce taxes, in other words, return some money to the people,” said Mark Emkes, Commissioner of the Department of Finance and Administration.
“Money grows, the government grows, the budget grows. But the idea being that rather than just spend that money… it’s best to give that money back to the citizens of Tennessee,” he told TNReport.
The governor now is behind two tax cuts: reducing the tax on food from 5.5 percent to 5.3 percent, and phasing out the tax on inheritances worth more than $1 million. He also said he was weighing House Republicans’ idea of eliminating the tax on gifts.
Collectively, those reductions would mean $145 million in tax cuts over four years, said House Finance Committee Chairman Charles Sargent, R-Franklin.
“I think every year we need to start looking at reducing taxes. As revenues grow, I think we can reduce taxes by an amount of money so we don’t just keep growing the size of government,” said Sargent.
But that doesn’t mean there aren’t a couple things he’d like to see Haslam add back into his budget, he said, such as about $3 million for family resource centers and $2.4 million for peer support centers.
The governor expects to hand off his latest budget recommendations to the General Assembly Monday, April 2. Emkes plans on presenting those details to legislative budget committees Tuesday.