Democrats in the House of Representatives are looking to dish up a bigger slice of tax cut for Tennesseans who purchase their groceries in the state.
During a Legislative Plaza press conference Thursday, Democratic Leader Craig Fitzhugh, caucus chairman Mike Turner, D-Old Hickory, and other party members laid out a plan to put ballooning state revenues toward restoration of rations to existing government programs in addition to further reducing the state’s tax on food items.
The Democrats’ “responsible alternative” to Gov. Bill Haslam’s budget offering hinges on their calculations that the state has “over $200,000,000 in excess revenue not being accounted for in the administration’s budget.” Fitzhugh said the $200 million figure Democrats are using is based both on higher-than-expected revenue collections over the past year, and the assumption that the economy will continue improving.
“I am not saying you should spend it all, but a budget should have the plan for what you are going to do with it — if you are going to place it in the rainy-day fund, if you are saving it for a project next year, if you are going to refund it in the way of tax reductions, something,” he said. “It should have some plan attached to it — that’s the whole purpose for having a budget.”
“The economy is better, but it is certainly not out of the woods yet,” added Fitzhugh, a banker and lawyer from Ripley. “And to just sit on $200 million dollars doing nothing except earning a treasurer’s rate, which as we know is not much right now, it seems not as responsible as we could be.”
The Democrats unveiled a roughly $100 million wish list of government programs and spending they’d like to see added to the new state budget, including more money for college scholarships, community colleges, technology centers, TennCare, K-12 education and assistance programs for the disabled.
“The alternative budget is balanced; it does not use all the excess revenue available and maintains a $50,000,000 contribution to the state’s rainy day fund. The plan also calls for using cash in lieu of proposed bonds on capital outlay projects, saving taxpayers 30 percent to 40 percent in interest rates over the life of the bonds,” according to a press release issued by the House Democratic Caucus.
“It’s not just spending for the sake of spending — it is spending that we have done before,” said Fitzhugh.
And they want to phase in a full 1-penny-on-the-dollar cut in the grocery tax over the next four years.
Earlier this month the House of Representatives voted 96-0 to cut Tennessee’s tax on grocery purchases from 5.5 percent to 5.25 percent. The Senate’s version of the measure hasn’t yet reached the chamber floor. Gov. Haslam has indicated he’s open to cutting the grocery tax further in coming years should the economy keep improving.
House GOP Caucus Chairwoman Debra Maggart said Thursday the majority party isn’t too interested on first glance in the extras Democrats say they’d like to plate up in the 2012-2013 budget.
“As usual, when additional money comes in, the first thing Democrats want to do is find new ways to spend it,” the Hendersonville Republican said through a spokesman. “While they have a right to propose initiatives for worthy causes, (House) Finance Chairman Charles Sargent has worked with the administration to develop a comprehensive balanced budget plan that cuts taxes and reduces wasteful government spending while meeting the priorities of Tennesseans.”
Fitzhugh indicated it probably wouldn’t shock him if Republicans don’t adopt the Democrat’s alternative budget. Nevertheless, he noted that at least with regard to the grocery-tax cut that’s already passed in the House this session, Republicans were initially resistant to the plan before ultimately coming around to support it.
“I don’t want to get ‘D’ and ‘R’ here, but the original food-tax proposal was a ‘D’ proposal,” Fitzhugh said during the press conference.
The House Democratic leader later told TNReport.com that while Republicans and Democrats may differ philosophically over the relative equity and benefits of large, targeted tax cuts for the few — namely, cutting the estate tax, which the House also voted to do last week — versus lightening burdens like the food tax that all Tennesseans bear, both parties agree that it’s always good to find ways to encourage Tennesseans to shop here rather than across state lines.
Justin Owen, president of the free-market Beacon Center of Tennessee in Nashville, said his organization is primarily interested in finding creative and sustainable ways to “cut government spending, not enhance it,” so they don’t find the Democrats’ proposals for increased program funding all that appetizing.
“When government collects more revenues than projected, it should return it to taxpayers, not spend it,” he said. And as far as the debate over what kind of tax cut ultimately provides the state with greater economic benefit, “a food tax cut will not make anywhere near the economic impact as eliminating the death tax or rolling back the Hall tax (on stock income and dividends),” Owen said.
But the Democrats’ idea of increasing the size of the food-tax cut certainly ought to be considered seriously, he said.
“Cutting the tax on food to be competitive with bordering states is a worthy endeavor,” Owen said. “A lower food tax could potentially lead to other states’ residents shopping for groceries in Tennessee rather than the other way around.”