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Haslam Touts TN’s No-Income-Tax Status Before National TV Audience

Tennessee’s governor bragged Tuesday on national television about the relative economic merits of living in a state where the electorate has historically resisted government attempts to impose income and payroll taxes on the citizenry.

The absence of state and local levies on personal incomes and business workforces has made Tennessee an attractive destination for industry, entrepreneurs and investors, Gov. Haslam suggested.

Speaking with CNBC’s Rick Santelli — the self-described “spark” that started the Tea Party movement in 2008 — Haslam joked that he’s in fact all for other states sticking with their punitive taxes on productivity, so that the Volunteer State can continue to offer a land of promise for those with the courage to flee for the greener pastures of Tennessee.

“It’s a competitive advantage. I hope they keep a very high cost structure and a high tax structure in place,” Haslam said.

Tennessee is one of nine states without an income tax.

Here’s a transcript of the interview:

Rick Santelli: Listen, I was surprised. Your state has never had a state income tax, although you do and are required to pay taxes on… interest income and dividends. So, can you please explain how that’s worked for the state and how it came to be that they were one of the states that just never decided to put it on the books.

Gov. Bill Haslam: I’ll chalk it up to the wisdom of some of our forefathers and mothers who realize that people have a choice where they live. And so you can live in a high-tax state, a California or Illinois, or you could live in a Tennessee where your personal income is not going to be taxed. We think it’s a competitive advantage. We actually have seen our growth be up this year considerably in a fairly, obviously tough economic time. Again, because people choose where they want to base their business, where they want to base their family, and they’re going to choose where it’s economically advantageous to them.

Santelli: But governor, come on. You must hear the critics. If you’re collecting state income tax, you’re not collecting a big pile of money that Illinois and California, New York are enamored with. How can your state run so efficiently? How do you make up that revenue?

Haslam: Right. So I’d ask, how’s that working out for them? Look at the states with the biggest deficits, and they’re the states with the costliest structure and the highest tax burden, and people are choosing where they’re going to live. Obviously, you all have been tuned into the whole, “the private sector is doing fine” remark. Maybe what we should question there is that the public sector is not doing well. In Tennessee our revenues are up year over year about 7 percent, that’s solid in this economy. We’re not laying off teachers. We’re not doing all those things because we haven’t let our cost structure get out of place. The places that are hurting, whether it be municipalities or states, are those states that have let their wages get high, mostly their pension costs get out of balance. That’s what’s driving the issue and not a fundamental issue that we’re cutting back on public-sector jobs.

Santelli: So if I’m understanding you right, your argument for the other states that are either considering and maybe for the states that should, is that without state income tax, you’re bringing in a population of potential entrepreneurs, potential investors, and it’s their activities and what it creates that generates more than you’re losing. Is that about right?

Haslam: Right. But I’m actually arguing, I hope the other states don’t do that. Like I said, it’s a competitive advantage. I hope they keep a very high cost structure and a high tax structure in place. But seriously, I’ll give you a couple examples. Volkswagen spent well over $1 billion in Tennessee building a manufacturing plant. One of the things that made them decide to be here was no income tax. I talk to entrepreneurs all the time, whether they’re sole proprietors or sub S corps. who have moved here because they just did the math. They were living in a higher tax state, and they said, “I can move to Tennessee. Here’s what it will save me every year.” Eventually, people who have capital are going to decide to deploy that capital where it’s going to get the best return. They don’t know boundaries. They’re going to go where they’re going to get the best return for their capital. We think Tennessee is one of those states.

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TNGOP Chides Democrats Voting Against Income Tax Ban

Press release from Tennessee Republican Party; Jan. 19, 2012:

Once Again, Tennessee Democrats Stand Up For A State Income Tax

NASHVILLE, TN – Today, the Tennessee House of Representatives voted in favor of a resolution to amend the Tennessee Constitution by adding language to ban a state income tax. SJR 221, sponsored by Representative Glen Casada, passed the Republican-controlled House by a vote of 73-17-3.

The amendment will now have to be approved by a two-thirds majority in both the House and Senate in the next session. The amendment will then be placed on the ballot, coinciding with a gubernatorial election, to allow Tennessee voters to approve.

“I applaud our Republican leadership for moving us one step closer to solidifying the unconstitutionality of a state income tax. However, several Tennessee Democrats once again showed their liberal mindset by reinforcing their belief that government should not be restricted from dipping into your paycheck,” said Tennessee Republican Party Chairman Chris Devaney.

“While Tennesseans work hard to get through this economic recession, Tennessee Democrats are content with duplicating President Obama’s philosophy of raising taxes to meet reckless government spending, instead of reducing government to meet current revenue,” said Devaney.

Democrats Who Voted Against Banning a State Income Tax: Karen Camper, Barbara Cooper, Charles Curtiss, Lois Deberry, G.A. Hardaway, Bill Harmon, Mike Kernell, Larry Miller, Gary Moore, Jimmy Naifeh, Joe Pitts, Jeanne Richardson, Johnny Shaw, Mike Stewart, Harry Tindell, Joe Towns, and Johnnie Turner.

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Incoming!

UPDATE: The House passed SJR221 today, 73-17. The measure will come up again for a second vote in both the House and Senate in the next legislative session, when it must pass by a two-thirds majority.

The House of Representatives is set this week to move toward amending the state Constitution to clarify that an income tax is banned in Tennessee.

Senate Joint Resolution 221, sponsored by Sen. Brian Kelsey and Rep. Glen Casada, both Republicans, has already passed in the Senate. A vote was postponed in the House last spring on the request of House GOP Leader Gerald McCormick, who was hesitant to dive again into the historically contentious debate when the measure came to the floor in the waning hours of the 2011 session.

The text of the proposed amendment to the Tennessee Constitution reads as follows:

Notwithstanding the authority to tax privileges or any other authority set forth in this Constitution, the Legislature shall not levy, authorize or otherwise permit any state or local tax upon payroll or earned personal income or any state or local tax measured by payroll or earned personal income; however, nothing contained herein shall be construed as prohibiting any tax in effect on January 1, 2011, or adjustment of the rate of such tax.

Should a majority of House lawmakers vote in favor of SJR221 on Thursday, and it is expected to pass by a large margin, then Tennessee’s constitutional-amendment process — one of the most lengthy and politically arduous in America — will require that the measure come back before members of the General Assembly next session and be passed by a two-thirds majority in both Houses. If it succeeds, it would go to the people on the 2014 general election ballot.

The question of whether the state ought to have an income tax was once one of the most polarizing issues in Tennessee politics. In the late 1990s and early 2000s the looming prospect of politicians imposing an income tax on Tennesseans sparked nascent Tea Party protests outside the state Capitol.

That was then, this is now: Proponents of enacting an income tax have largely been vanquished from the Legislature and the mainstream of Tennessee politics.

“There aren’t too many left,” said Casada. “The voters took care of a lot of them over the years.”

Indeed, SJR221 was approved last year in the Senate with only four lawmakers, all urban Democrats, opposing it.

In the House, SJR221 has broad bipartisan support as well.

Democratic Leader Craig Fitzhugh and Democratic Caucus Chairman Mike Turner have both indicated they’ll probably vote for the measure. Both said they support giving Tennessee voters the opportunity to weigh in directly on the issue at the polls.

The Tennessee Constitution currently states, “The Legislature shall have power to levy a tax upon incomes derived from stocks and bonds that are not taxed ad valorem.”

Opponents of an income tax tend to believe that because the Constitution gives no direct authority to the Legislature to tax income in general, then it legally can’t. Supporters of an income tax have argued that because the Constitution doesn’t prohibit the Legislature from taxing all income, then nothing would legally stop it from doing so.

Asked Tuesday whether he believes taxing work income is currently prohibited under the existing wording of the state Constitution, Fitzhugh said he “doesn’t desire to rehash that again.”

The state’s most vocal proponent of enacting a tax on personal income is Tennesseans for Fair Taxation, which also includes other member-organizations like the Tennessee Education Association, the Tennessee Public Employee Association, the League of Women Voters and various other labor union, community activist and progressive advocacy groups.

Members of Tennesseans for Fair Taxation believe it would be fully constitutional — and desirable — for the Legislature to enact an income tax statutorily, and they staunchly oppose the effort to eliminate the General Assembly’s power to do so on its own.

“We feel that the (state constitutional-amendment) process is so in-depth and unlikely that it would essentially tie the hands of future legislators to use that option,” said Elizabeth Wright, executive director for TFT.

Constitutionally prohibiting the state from collecting income taxes in the future “would be devastating for Tennessee,” she added. Wright said members of TFT will likely join with Occupy Nashville protestors to demonstrate against the House passing SJR221, as they did last week when the Legislature convened to kick off the 2012 session.

Speaking on behalf of Tennessee’s League of Women Voters chapter last Legislative session, lobbyist Stewart Clifton told the House Finance Committee that the hands of future legislators “should not be tied at either the state level or the local level, as (SJR221) does.”

“An income tax is obviously nothing that anyone is proposing right now, but we don’t know what the future holds,” Clifton said.

The League of Women Voters has declared that it supports “a broad-based personal income tax and repeal of the Hall income tax in order to enhance the equity and balance of the tax structure and to produce adequate state and local government revenue.”

The League has also concluded that “the statewide income tax should be adopted by Legislative action rather than Constitutional amendment.”

Tennesseans for Fair Taxation has suggested that “there is no language (in the Tennessee Constitution) that specifically prohibits any kind of state tax based on income which is why the last three attorney general’s have all said that, properly worded, an income tax is constitutional.”

Former Attorney General Paul Summers, who served as the state government’s chief legal counsel from 1999 to 2006, twice declared that the Tennessee Legislature could conceivably establish a tax on people’s earnings in Tennessee, first in 1999, then in 2003, when he wrote that “there are various means by which the General Assembly could levy a tax on, or measured by, salaries, payrolls, or income.”

While SJR221 sponsor Casada says he thinks the current wording of the Tennessee Constitution prohibits an income tax — and points out that the Tennessee Supreme Court has endorsed that interpretation in the past — he agrees that SJR221 will tie the hands of future lawmakers.

That is, of course, kind of the point, he said.

“There are some things that are just so onerous that you don’t want to do them,” said Casada. “I think taxing a person’s income is one of those things.”

Casada disagrees, however, with the assessment that the income tax ban is in the truest sense “permanent.”

All that amending the Tennessee Constitution to prohibit an income tax would really do is slam the door on any backdoor maneuvering to sneak an income tax through the Legislature without a vote of the people, said Casada, who guesses that support in the general pubic for the thrust of SJR221 is “north of 60 percent.”

“There is no such thing as a permanent ban on anything in our constitutional democratic republic,” said Casada. “Granted, it takes work and time. But as long as there is a mechanism to change the Tennessee Constitution, there is a mechanism to change anything that is in it.”

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Leftovers on Menu for New Legislative Year

Republicans cleaned a lot of bills off their plate in their first year controlling the General Assembly and the governor’s office, but they built up a pile of bills they were saving for later.

Lawmakers say they plan to get down to business right away after returning to Nashville Jan. 10 in hopes of adjourning in late April to begin campaign season. But until then, they’ll have a roughly $30 billion budget to haggle over, new bills to debate and old ones to decide whether they’re worth passing before the election.

Guns on Campus, In Employee Parking Lots

Lawmakers talked about but never passed a number of gun bills proposed last year, including letting handgun carry permit holders lock their weapons inside their car while at work, HB2021, which made it to the House floor but never came up for a vote. Another bill, HB2016, would let college faculty and staff carry guns on campus, although that measure never made it out of committee. Legislative leaders on both sides of the aisle say they expect to see those issues introduced but probably sidelined this year. “Being an election year, I don’t see leadership letting that come to the surface,” said Sen. Bill Ketron, the Senate Republican Caucus Chairman from Murfreesboro.

Drug-Testing Unemployed, Welfare Recipients 

There’s a movement afoot to drug-test Tennesseans collecting public assistance. Two versions of the proposal were introduced early last year, SB48 and SB652, that would have focused on people collecting welfare. Both bills were immediately shelved in 2011, but Lt. Gov. Ron Ramsey is breathing new life into the idea with an eye on people collecting unemployment benefits and worker’s compensation. “I don’t think, again, that we need to be supporting that lifestyle with government money. I’m very much for that and I think you’ll see that passed this session.”

Income Tax Ban

This bill may have been left behind last Spring, but it’s expected to pass come 2012. The Senate OK’d a resolution, SJR221, asking voters to clearly ban an income tax by rewriting a portion of the Constitution. The legislation was held back in the House on the last few days of session. Lawmakers expect it will be one of the first they take up come January, but tax reform advocates plan to continue fighting for an income tax in exchange for lower food taxes. Debate over this bill is far from over — it would need a two-thirds vote in the 2013-14 General Assembly to get on the ballot.

Illegal Immigration

Republican lawmakers rallied to copycat Arizona’s illegal immigration bill and require drivers license exams be taken in English, but those bills never moved. In the midst of debate, another immigration bill filed that session fell just under the radar. HB1379 would require that governments check for proof of citizenship before issuing entitlements like TennCare, food stamps or unemployment benefits. GOP leaders say they’ll pick up this one and run with it and probably leave the others behind. “We’ve always wanted to ensure Tennessee wasn’t a magnet for illegal aliens,” said Rep. Debra Maggart, House Republican Caucus Chairwoman.

Picking Judges

Lawmakers kicked around the idea of changing how judges are selected, contending the current practice of the governor selecting judges who are later subject to retention elections is not in line with the state Constitution. “I think almost everyone agrees that’s a bad idea. I just don’t think everyone’s agreed on what is a good idea, yet,” said House GOP Leader Gerald McCormick. Democrats generally side with the Supreme Court, which has upheld the current system. One bill that remains from last year, SJR183, would ask voters to constitutionalize merit-based appointments. Other proposals have since popped up, like SJR475 which would require changing the Constitution to require the Senate OK the governor’s appointees.

Democrat’s Job Bills

Although they’re outnumbered, Democrats plan to take another stab at passing a stack of jobs bills that never got out of committee last year, such as calling for a small business tax holiday and giving tax credits to new entreprenuers. “We’re going to try again,” said House Democrat Leader Craig Fitzhugh, D-Ripley. “None of the jobs bills passed and none of them got out of committee but we’re going to have another go at it.” The same goes for Senate Democrats, said the chamber’s Democratic vice chairman, Andy Berke. “That’s really where we should begin 2012 in the legislature rather than most of the issues that have been named as priorities so far”

Wine in Supermarkets

This perennial bill doesn’t fall into any of the caucus’ priority lists but has become a staple piece of legislation to expect every year. SB316 seeks to allow certain retail food stores to sell wine instead of just beer. It would also let liquor stores sell items like cork screws and mixers. Last session, the bill never got out of committee. Advocates for wine in grocery stores say their new strategy is to convince the Legislature to let locals decide if they want wine in grocery stores through voter referendums, although legislative leaders say they haven’t heard any serious talk that the bill has momentum to pass this time around.

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Press Releases

TFT Plans Protest Against Proposed Constitutional Amendment to Ban Income Taxes in TN

Press Release from Tennesseans for Fair Taxation. Nov. 4, 2011:

Statewide Day of Action on November 12:

“Untax Groceries! Tax the Wealth!” Events Across the State Will Celebrate First Amendment Rights with Public Gatherings Opposing Income Tax Ban In Tennessee

(Nov. 4, 2011): Tennesseans across the state are invited to celebrate their First Amendment rights by peacefully assembling in a Statewide Day of Action Nov. 12. The “Untax Groceries! Tax the Wealth!” Day of Action will urge Tennessee Representatives to oppose a Constitutional amendment to permanently ban an income tax in Tennessee.

“Our present state tax system is immoral, unfair and bad for our economic future. It hurts the middle class and the poor. We have one of the highest sales taxes on groceries and other items in the nation. That costs us jobs and revenue that could strengthen education, health care and public safety in Tennessee.” Elizabeth Wright, director of Tennesseans for Fair Taxation (TFT), says.

“But instead of our State Legislators passing a solution that would help those of us in the middle class, they are fighting for a Constitutional ban on an income tax to protect the wealthiest Tennesseans from paying their fair share of taxes,” Wright added.

“Everyone who wants large corporations and the wealthy to pay their fair share of taxes so we can have more jobs and most Tennesseans can pay less in taxes should join us on November 12. We also want to celebrate the rights to free speech and peaceful assembly that were so bravely defended for us all by Occupy Nashville protestors Oct. 28,” says Dick Williams, TFT board chair. “The income tax ban is irresponsible and short-sighted. It would tie the hands of future legislators in accessing viable revenue options. Advocates of this ban have no idea what the future might hold for our state.”

The schedule of events includes Knoxville, Nashville, and Memphis as shown below:

Knoxville: Sat. Nov. 12, 2011 – 2 p.m. to 5 p.m. at the UNITE! Building, 1124 N. Broadway

Memphis: Sat. Nov. 12, 2011 – 3 p.m. to 4 p.m. with press conference at City Hall, 4 p.m.

Nashville: Sat. Nov. 12, 2011 – 10 a.m. to 4 p.m. at Legislative Plaza with Occupy Nashville

 

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TFT Sees Tipping Point in Battle Over Income Tax Amendment

Tennesseans for Fair Taxation, the folks known for advocating an income tax despite long odds, face a bigger fight as lawmakers move toward a constitutional ban on a tax on personal income.

About 40 TFT members from across the state gathered at the Second Presbyterian Church in Nashville on Saturday for their annual meeting to discuss their agenda and ways to better communicate their message of “tax justice.”

While the group is known primarily for the income tax stance, that proposal tends to overshadow other elements of their efforts, which involve lowering taxes elsewhere and looking for allies in the business community where they see unfairness on taxes in the private sector.

Erica Thomas of Memphis, who was in a carpool that left for Nashville at 4:30 a.m. Saturday, said the income tax ban is the most immediate challenge TFT faces.

“Stopping it in its tracks I think is going to be the biggest thing we have to focus our energies on,” Thomas said. “What you’re doing is cutting off your nose in spite of your face, cutting off any other possible revenue sources that we could have that invest in the state.

“It has already been shown that a sales tax is not going to get us out of this problem. Tennessee is surrounded by so many other states that have lowered taxes on basic necessities, so people are going across state lines. I just don’t understand the disconnect there by legislators.”

Sen. Brian Kelsey, R-Germantown, is sponsoring a resolution (SJR221) that would explicitly prohibit the General Assembly from enacting or permitting an income tax. It passed the Senate on May 18, 26-4, and has been placed on the House calendar for Jan. 10, 2012.

The resolution is co-sponsored in the Senate by, among 19 Republicans, two Democrats: Andy Berke of Chattanooga and Eric Stewart of Belvidere.

Berke, the Senate Democratic Caucus vice chairman, told TNReport last spring that “Tennessee has a strong tradition of being against the income tax — it’s one of the reasons why we are a business-friendly state.” He added, “Most Tennesseans understand that (not having an income tax) is important to our way of life and our quality of life.”

Regarding the issue of whether the income tax is already unconstitutional, it’s time to “get that settled,” said Berke, “so we won’t really have to have that debate anymore.”

For the constitutional amendment to be approved, it would next have to pass the House by a majority vote in 2012, then pass the next Legislature by two-thirds votes in each chamber, then go before the people in a referendum in 2014. Supporters of the referendum say it is the best way to close the door on an income tax in the state for good.

In addition to advocating for an income tax, Tennesseans for Fair Taxation emphasizes its goal of cutting the sales tax on food and reducing the sales tax in general, which the group sees as regressive, even “immoral.”

Samantha Wallace of Knoxville, an organizer for TFT in East Tennessee, says the group’s mission is about justice. The organization wants to see an adequate revenue stream to support government services it says are vital.

“The main purpose is to generate enough revenue to support our state, and we want to do that in as just a way as possible,” Wallace said. “What I mean by ‘justice’ is right now the way we generate revenue in the state is immoral.

“We tax things like clothing and food. These are predominantly focused on the sales tax. It doesn’t raise enough revenue for the state. It’s immoral because we’re forcing people who can’t afford it to pay additional taxes on their food. We have a regressive tax. We need to fix that.”

Elizabeth Wright, executive director of TFT, says the primary goal is to “modernize” the state’s tax structure. She said the sales tax hits low- and middle-income families hardest because it is regressive in nature.

“We want to make sure that our economy thrives, that Tennessee thrives,” Wright said.

To that end, in a roundtable discussion in one of the breakout groups for the day-long meeting, members of the group discussed ways to partner with the business community.

Nell Levin said it is important for the group to bring the business community on board as allies in TFT’s efforts.

“I really believe we’re never going to win unless we get them on board and there’s a lot of things about the business taxation that is really unfair,” Levin said. “We have one of the highest franchise taxes in the Southeast. This is something we could go to business people and talk to them about.”

It was clear that TFT members like some of the tax legislation the General Assembly passed this year, like an adjustment that increases the exemption on the Hall income tax, which derives revenue from interest and dividends on investments. The Legislature raised the exemption on the Hall tax on those 65 and older to $26,000 for single taxpayers and $37,000 for joint filers. Those are increases from $16,200 for single filers and $27,000 for joint filers.

“They actually made the Hall income tax more progressive,” Tony Garr said. “There does appear to be a willingness on the part of some Republican legislators to reduce the tax on food. Those are two things I think we need to keep in mind.”

Thomas was asked if she had 30 seconds with Gov. Bill Haslam what she would say to him. She responded it would be more about what she would ask him.

“If not an income tax, tell me how with the sales tax going up are we going to generate revenues we need across the state?” she replied. “I need you point blank to tell me: What is your plan for us getting there? So maybe we can collaborate on that, but I haven’t heard what your plan is.”

Haslam has repeatedly said there is no chance of an income tax being implemented in Tennessee.

Anne Barnett of Knoxville said she first got involved with TFT as a student at the University of Tennessee. Her concerns were raised by rising tuition, budget cuts and the school letting professors go.

“The tax structure in Tennessee is regressive,” Barnett said. “We’re always going to be fighting for more funding for public services.”

She was asked, being from Knoxville, if she had ever met Haslam, the former Knoxville mayor. She hesitated before answering.

“Not personally, but my husband used to deliver pizza to him,” she said. “And he would never leave a tip.”

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GOP Showing Little Taste for Lower Food Tax

Now that Tennessee Republicans are “large and in charge” of state government, as minority Democrats like to snidely put it, they seem to have lost their appetite for cutting the state’s sales tax on food.

Even though Tennessee is looking at $62.3 million in excess revenues over the last 11 months, lowering the tax isn’t likely to happen any time soon, say powerful majority-party politicians.

Nevertheless, Tennessee Democrats are floating a plan to give part of the overage back to taxpayers — by reducing the 5.5 percent tax on food and making additional funds available for “needs-based” college scholarships.

The Volunteer State now charges a 7 percent sales tax on items other than food and is one of seven that offers a reduced rate on groceries, although 31 states exempt most non-restaurant food purchases from sales taxes.

Republicans, who consolidated their political power in the 2010 election promising a more fiscally disciplined, taxpayer-friendly state government, last month scoffed at Democrats for offering up a plan to reduce the tax on food.

“It’s just irresponsible,” House Republican Leader Gerald McCormick told TNReport. His preference is the state keep any extra tax collections safely locked up in the government’s savings account for spending later in leaner times, like when Washington starts ladling out smaller helpings of federal largess.

Lt. Governor Ron Ramsey claims he’d “love to eliminate the food tax.”

Not now, though.

“I hope and pray that Tennessee will soon be in a position to do just that,” the Blountville Republican said in an e-mailed statement shortly after the Democrats served up their tax-cut idea. “But a revenue blip does not a surplus make.

“While the new revenue numbers are encouraging, the last few years have taught us that we cannot afford to be cavalier with the contents of our treasury,” he said.

Ramsey, who recently proclaimed that “a basic philosophical difference between Democrats and Republicans” is that the latter favor taxpayers keeping their own money in times of revenue surplus, accused Democrats of “craven political posturing” for proposing a tax cut on groceries in the current fiscal climate.

Requests through Ramsey’s spokesman for further comment and explanation from the lieutenant governor went unanswered.

Republicans didn’t used to be so hostile to the idea of a tax cut for Tennesseans who purchase food. Indeed, some, like Kingsport Rep. Tony Shipley, once upon a time got elected promising to push for food-tax relief.

In 2007, Sen. Mae Beavers was at the forefront of the legislative effort to reduce the food tax, ultimately by half a cent. At the time, she complained that wasn’t enough. But now she’s just irritated the matter has popped up again.

“I really take offense to (Democrats) making a political issue out of it this time when they had a chance to take it all off a few years ago,” said Beavers.

Gov. Bill Haslam was more conciliatory towards the proposal, saying he “100 percent” agrees with Democrats’ desire to reduce taxes on groceries when the state collects excess money from taxpayers.

In principle, anyway. He questions though whether tens of millions of dollars in over-collections truly represents a “surplus” at this time.

“If we had a surplus, we should not be keeping the money. I couldn’t agree more,” the governor told TNReport. “It’s just way too early to say that because I have a feeling we’re going to have to make some hard calls.”

The catch, Haslam says, is state government would need to consider cutting millions of dollars in services now covered with $160 million in one-time money, address rising education costs and weather instability from the economy and federal government in order to reduce the tax.

“There’s a whole lot of stuff in there I can guarantee the Democrats and most of the Republicans don’t want to cut,” Haslam said. “My first word would be to the Democrats, how do you feel about that $160 million in services? Are you ready for all of those to go away, because our overage is not enough to do both.”

Rep. Craig Fitzhugh, the leading Democrat in the House, says he sees nothing particularly ludicrous about proposing to cut “one of the highest sales taxes on food in the entire country.”

“If that’s absurd, well, we need more absurdity in government, because I think that’s an excellent option that we may have,” said the Ripley Democrat.

Lawmakers this year considered a plan to raise the tax on soda in exchange for lower food taxes, but that issue went nowhere. Lawmakers did manage to lower taxes on investments for some senior citizens by raising the income benchmark by $10,000 to exempt more individuals and couples from paying the Hall income tax.

While legislators play political ping-pong over the excess taxpayer dollars, state government observers of various ideological stripes agree the partisan bickering ought to be set aside in favor of a serious policy-driven conversation.

“It’s not enough to rely on the whims of either political party to return excess revenue to taxpayers,” said Justin Owen, executive director of the Tennessee Center for Policy Research, a free-market think tank which has advocated a reduction in the grocery tax.

What the state should do is automatically kick any excess revenues back to the public at the end of each fiscal year, he said.

Ben Cunningham of Tennessee Tax Revolt said it seems obvious to him “any surplus ought to be returned to the taxpayer.”

“The time to give tax revenue back to the families to put back in the family budget is in the good years, this way you even out the ups and downs of tax revenues and you better control the size of government,” said Cunningham, a prominent voice in Tennessee’s tea-party movement.

Tennesseans for Fair Taxation, a coalition of liberal activists, unionized workers and progressive advocacy groups, has long pushed for reducing Tennessee’s reliance on a sales tax. TFT argues Tennessee’s tax on food is perniciously high — that it, in essence, constitutes a “tax on life.”

“Groceries represent a much bigger portion of low-income families’ budgets while it only represents a small fraction of most high-income families’ budgets,” argues TFT. “By eliminating the tax on food, the average family would save enough annually to buy a whole month’s worth of groceries.”

TFT’s preference for instituting a state income-tax to offset reduced revenues from a lower or eliminated grocery-tax doesn’t seem likely to gain much traction in the GOP-dominated Legislature, where the wheels are in motion to constitutionally ban an income tax.

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Freshman Rep. Elam Touts Accomplishments of TN’s ‘Historic Conservative Majority’

Press Release from the House GOP Caucus, June 8, 2011:

Mount Juliet Legislator Calls First Session the Most Successful in Tennessee History

(NASHVILLE, June 8, 2011) – After years of near one Party control in Tennessee politics, Republicans won control of the Governor’s mansion, Senate, and House for the first time in the history of the State. Representative Linda Elam (R—Mount Juliet) played a key role in the opening session of the 107th General Assembly and Tennesseans immediately benefitted from the conservative leadership.

“It is an honor to be a part of such a historic conservative Majority,” remarked Rep. Elam. “Tennesseans understand we pushed through a conservative, pro-growth agenda that reflects their values. They can take heart that, finally, their Representatives in Nashville are listening to them.”

The first Session was marked by conservative milestones many Tennesseans have worked hard to see come to fruition. Among those items:

  • Tort Reform: This was a key centerpiece for the Governor’s jobs agenda and the General Assembly fashioned a new law that provides certainty in the business environment. With this confidence, more companies are better able to quantify the cost of doing business and can allocate more resources to provide jobs for Tennesseans.
  • Charter Schools: The Republican Majority lifted the cap on charter schools in Tennessee, ensuring that all children across the State will have access to a high quality education. Republican legislators, like Representative Elam, understand the key to long-term job growth in Tennessee is in the training of a strong workforce.
  • Collaborative Conferencing: In a major reform unlike any seen across the country, conservative legislators pushed through a new model for education that allows all teachers to have a voice when it comes to setting education policy and removed the barriers set up by the union so our hard-working teachers can be rewarded at a higher rate.
  • Ban on Income Tax: The process was started for a constitutional amendment in Tennessee that would forever prohibit an income tax from being levied on Tennesseans. The process for an amendment is long, but this Republican Majority is united in ensuring this common sense, pro-jobs measure becomes law.
  • Government Reform: In a move to increase transparency and efficiency for taxpayers, the House eliminated a number of duplicative committees that caused confusion for many citizens trying to follow legislation through the General Assembly. With this reform, bills will travel on a streamlined path that provides Tennesseans a format to voice their concerns on legislation. Additionally, the move saved Tennesseans nearly $1 million.
  • The State Budget: Republicans passed a fiscally conservative budget that reflects the principles of Tennesseans and meets the needs of our State. Overall, the Republican Majority reduced spending by $1.2 billion and rolled back a number of areas of duplicative government programs.

While much focus was given to these high-profile pieces of legislation, there are a number of other new laws that were ushered through to make government more responsive to Tennesseans and limit the influence of government regulation. Rep. Elam helped guide a number of these bills to final passage, a noteworthy achievement for a first-year legislator. Among the legislation she co-sponsored:

  • Voter Photo ID: This bill ensures integrity at the ballot box, something Tennesseans have long asked for. Essentially, voters are asked to present a valid photo ID to obtain a ballot. Parallel legislation passed to ensure citizens who may not have an ID can obtain one for free. These laws will protect Tennessee from having to deal with ballot box abuse and voter fraud.
  • Welfare Reform: This new law will prevent abuse of the Families First benefits program. It places common sense requirements on those utilizing taxpayer-funded benefits such as a prohibition against drug use or enrollment in a drug treatment program.
  • Voting Reform: This new law authorizes the coordinator of elections to compare the statewide voter registration database with the department of safety database, relevant federal and state agencies, and county records to ensure non-United States citizens are not registered to vote in this State.
  • Veterans’ Families: This legislation extends property tax relief to the surviving spouse of a soldier whose death results from being deployed, away from any home base of training and in support of combat operations. This was one way to honor the sacrifice our soldiers make in the line of duty.
  • Wilson County: Representative Elam guided a bill designating the bridge at State Route 109 and U.S. Highway 70 in Wilson County as the “Spc. Michael Lane Stansbery, Jr.” bridge to honor one of Wilson County’s fallen soldiers.

In reflecting on the reforms passed by the House of Representatives in her first term, Rep. Elam stated, “I tailored my personal record—the votes I took, the legislation I carried—to the wishes of my constituents. I heard them loud and clear last fall when they told me they wanted a government that is limited and respects our constitutional rights.” She continued, “Over the summer, I look forward to traveling around the 57th District and listening to the people once again. I am eager to get their feedback, bring it back to the Capitol next year, and work hard to make the Volunteer State an even better place to live, work, and raise a family.”

For a complete listing of Representative Elam’s legislative record, click here.

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Business and Economy Featured News Tax and Budget

Income Tax Ban Redo — Again

A constitutional amendment to definitively ban a state income tax has already won approval by one full chamber and was on the move in the other. But the measure’s key House sponsor says he’s going to scrap it and start all over.

Rep. Glen Casada, R-College Grove, the former GOP caucus chairman in the House, said he is recasting the proposal and starting it from scratch because members of the House Finance Subcommittee attached an amendment to the resolution that would also cap state and local sales tax rates.

“It was too open,” Casada said of the resolution, which passed in the Senate 28-5 on March 9. Casada worried the measure’s added language both freezing the state sales tax and banning an income tax is too much for voters to weigh on one ballot question.

However, Casada says a new resolution, HJR231, has been “written it so tight it will hold no amendments.”

HJR231 reflects the main thrust of the original anti-income tax resolution and would add language to the Tennessee Constitution at the end of Section 28 concerning the state’s taxing authority:

Notwithstanding the authority to tax privileges or any other authority set forth in this Constitution, the Legislature shall not levy, authorize or otherwise permit any state or local tax upon payroll or earned personal income or any state or local tax measured by payroll or earned personal income; however, nothing contained herein shall be construed as prohibiting any tax in effect on January 1, 2011, or adjustment of the rate of such tax.

The new measure also deletes language from the first bill that would have permitted the state to forgo the customary printing of proposed constitutional amendment language in the states’ larger newspapers and instead publish just on the web. That issue, too, is up for debate on Capitol Hill this legislative season.

Now that Casada is introducing the new language, he and Kelsey will have to run it by a series of committees in their respective chambers for a second time. The proposal will go before a House committee hearing late next week, he said.

House Democrats last month managed to tack on language to the measure that would have banned sales tax increases and permanently require the state to stay within it’s fiscal means.

Sen. Brian Kelsey, who spearheaded the bill in the Senate, said he wasn’t happy with the old version after Democrats, joined by two Republicans on the subcommittee, amended it, but still believes there is enough time left in this year’s session to pass the measure again.

“I am open to any amendments that are not poison pill amendments,” said Kelsey. “And, as I understood, that sales tax amendment, that was a poison pill amendment that was meant to kill the no state income tax constitutional amendment.”

The Senate last year passed Kelsey’s income tax ban as well, but the measure died behind the budget in the House because of the fiscal note for publishing it in newspapers.

Kelsey and Casada both say they like Democrats’ idea to ban any future sales tax increases, but say it would make the issue just muddy enough to prevent it from passing both full chambers in two years when it needs a two-thirds vote by lawmakers to make it on the ballot.

Plus the amendment would essentially ask voters to ban both an income tax and an increase in the sales tax — issues Republicans say should be weighed on separately.

House Democratic Leader Craig Fitzhugh said Democrats aren’t at all upset that the sales-tax capping amendment won’t stay on the proposed income tax prohibition.

“We were sort of encouraged to see that the former leader over there (former GOP caucus leader, Casada) said it was a good amendment,” he said.

“We can’t pass anything – they have to have the votes. But if we have convinced it’s the right thing to do, I think that would be good for all.”

Old Hickory Rep. Mike Turner says he doesn’t see his Democratic caucus fighting too hard on the straight-forward income tax ban, although he contends the income tax is already prohibited in the constitution.

“I personally think it’s already banned and it’s already been banned,” said Turner, who added that there’s no real pressure in Tennessee to impose an income tax, anyway.

That’s not a position held by everyone in his caucus, however. House Speaker Emeritus Jimmy Naifeh, fought to institute an income tax in the late 1990s and early 2000s. Last year several Democrats signed on to a “Tax Cut and Job Creation Act” that, while not a constitutional amendment, sought to enact a statewide income tax. The bill was reintroduced again this year, then withdrawn.

Although Turner, the House Democratic Caucus Chairman, says an income tax is already banned, traditional supporters of his party disagree. Tennesseans for Fair Taxation, which counts among its coalition of supporters the Tennessee State Employees Association and the Tennessee Education Association, believe not only is an income tax legal, but it is necessary.

An income tax is strongly supported — and the constitutional ban on one is vehemently opposed — by TFT, which “has for many years advocated cutting our sales tax in half and eliminating the food tax entirely.” The group regularly calls for trading a chunk of Tennessee’s highest-in-the-nation combined state-and-local sales tax rates for “an income tax with generous exemptions.”

“The Tennessee Constitution is mute or ambiguous on whether the state has the power to levy a tax based on income other than dividends and interest,” Bill Howell, the Middle Tennessee organizer for TFT, told a Senate committee hearing Kelsey’s income tax ban amendment earlier this year. “How we fund our government is at the core of our life together, and the justice of who pays for our government is a primary concern for all of us.”

Asked at one point during the hearing why he didn’t support giving the people the chance to vote for themselves on the issue of whether the state constitution ought to allow an income tax, Howell said “we have a representative form of government or a reason.”

“You have the power to foresee that there could be an emergency,” he told lawmakers. “If we leave this to the people and they do decide to forgo a future possibility (of enacting an income tax), they may live to regret it.”

House Speaker Beth Harwell expects the new constitutional rewrite will have few problems working its way through the legislative process during the final weeks of the legislative session, although she personally believes the current language bans any future income tax.

“Clearly, it’s what the public wants. My feeling is it’s already unconstitutional but just to be absolutely sure, we’re going to place this amendment before the people,” she told TNReport.

Because the proposal would change the Tennessee Constitution, it still has a long way to go before it can become law. The measure needs a majority vote in both chambers by the current General Assembly — which meets through 2012 — and a two-thirds vote in the next assembly before it can be put to voters on the 2014 ballot.

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News NewsTracker Tax and Budget

Kelsey Likes Proposal to Cap Sales Tax — Just Not on His Income-Tax Ban

Sen. Brian Kelsey is sponsoring a measure to give voters the chance to end, once and for all, the long-running debate over whether an income tax is constitutional in the state of Tennessee.

But the conservative Germantown Republican said Monday he opposes a House amendment added to his resolution last week that would additionally cap the state sales tax in the process of outlawing the income tax.

The amendment, proposed by House Speaker Emeritus Jimmy Naifeh, D-Covington, and approved by the House Finance Subcommittee on a 7-6 vote, is actually a “poison pill,” said Kelsey, R-Germantown.

Its real purpose, he alleges, is to ensure that the anti-income tax language never ends up on a Tennessee general election ballot.

“The process for amending the constitution in Tennessee is very difficult. It requires a simple majority vote in the House and Senate the first go-round — but it also requires a two-thirds vote the second go-round” before it can go to the people, Kelsey told TNReport. “(Naifeh’s) amendment was put on to make sure there wouldn’t be a two-thirds vote.”

Kelsey suspects Naifeh’s motivation for adding the amendment is to “leave the door open for an income tax” down the road. The former House speaker famously tried mightily — but ultimately failed — to push a tax on work-earnings through the Legislature in the late 1990s and early 2000s.

Kelsey added, however, that he is not at all opposed to capping the sales tax at its current combined state-and-local rate of 9.75 percent. He said he’d fully back that effort as a separate constitutional amendment.

The anti-income tax resolution, SJR 18, has already been approved by the Senate, 28-5. It is scheduled for a hearing this afternoon in the House Finance Ways & Means Committee.