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Business and Economy Tax and Budget

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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Press Releases

Democrats: Haslam’s Tort Reform Substitutes Will of Politicians for Wisdom of Juries

Press Release from the Tennessee Senate Democratic Caucus, May 12, 2011:

NASHVILLE – Senate Democrats fought Thursday against efforts by Senate Republicans to arbitrarily cap damages awarded to victims of horrific accidents, medical malpractice and other life-changing injuries.

“Today state lawmakers put a price on the life of our children. They put a price on the life of our parents and grandchildren. They put a price on the life of the weak, the paralyzed, the neglected — all under the guise of economic development,” Senator Eric Stewart of Belvidere said.

House Bill 2008, as passed by the Senate 21-12, would cap damages for pain and suffering awarded by a court to $750,000, and $1 million for severe injuries. Currently Tennessee does not have a cap on such damages.

“By passing this law, lawmakers are taking the decision-making process away from a jury of citizens and telling them that the government doesn’t trust them to make the right decision,” Senator Andy Berke of Chattanooga said.

Punitive damages would be capped at the greater of either $500,000 or twice the amount of the combined economic and non-economic damages. Because economic damages include lost wages, the total payouts will be lower for those who make less.

Sen. Roy Herron noted during floor debate that a young quadriplegic woman receiving the maximum amount possible under the caps would receive an estimated $29 per day over the remainder of her life.

An Associated Press story noted that last year in Tennessee, only 14 trials exceeded the proposed caps, meaning there would be no radical change to the state’s job creation climate, as supporters claim.

“We should be up here talking about measures to create jobs and put people back to work,” said Chairman Lowe Finney of Jackson. “This legislation doesn’t create jobs. Instead, it hurts those who need help the most.”

The bill will now go to Governor Bill Haslam, who is expected to sign the legislation.

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Press Releases

Senate Dems’ Week in Review: April 15

Press Release from Senate Democratic Caucus: April 15, 2011:

Legislative Update Week of April 10- 14

Continued Calls for a Jobs Plan

Following another month of stagnant unemployment figures in Tennessee, Democrats in a press conference Monday again asked for answers on promised job-creation strategies from the administration and the Republican majority in the legislature. While national unemployment rates continue to drop, unemployment in Tennessee remains steady at 9.5 percent after rising in February. Meanwhile, Governor Bill Haslam gave nearly $250,000 in taxpayer money in raises to his commissioners, even though they were already making six-figure salaries.

Democrats again asked Republicans to consider their jobs creation bills and work together to help 300,000 Tennesseans find work. Democrats pointed out that since achieving a majority in both chambers and the governorship, Republicans have spent time debating whether dogs should wear seat belts, rewriting science books and talking about creating Tennessee’s own currency. The only jobs effort has come in the form of three RVs with flatscreen TVs to help Tennesseans create résumés. The vehicles cost more than $500,000 in federal stimulus money.

The next day, the Republican-controlled Senate Tax Subcommittee gave negative recommendations to job creation bills by Senator Eric Stewart and Senator Andy Berke, meaning that the bills are unlikely to proceed out of the Finance, Ways & Means Committee.

Berke passes bicyclist safety bill

Thursday the Senate unanimously passed Senate Bill 1171 by Sen. Berke, which would strengthen the requirement that drivers exercise “due care” when driving to specifically include operating safely around bicycles and pedestrians. The bill would make failing to yield to pedestrians or pass a bicyclist safely a Class C misdemeanor, punishable by a maximum $50 fine and/or up to 30 days in jail. The punishment would increase if the incident resulted in injury or death.

AG: Voter photo ID requirement unconstitutional

Tennessee Attorney General Robert E. Cooper Jr. opined Wednesday that Senate Bill 16, which would require Tennesseans to present a photo identification card in order to vote, would be equivalent to a poll tax and would violate both the U.S. and Tennessee constitutions. The opinion stated that legislation to provide the ID cards free-of-charge would remedy those problems. Senator Lowe Finney has a bill that would do just that; the House version of the bill is scheduled to be heard in the Transportation Committee on Tuesday.

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Press Releases

TN Senate Democratic Caucus Update: March 19-24

Press Release from the Tennessee Senate Democratic Caucus, March 24, 2011:

LEGISLATIVE UPDATE

Mountaintop Removal

Senate Bills 577 and 578, which would effectively ban the practice known as “mountaintop removal coal mining” were delayed one week in the Senate Environment, Conservation, and Tourism committee. Republicans attempted to delay the bills two weeks, which would have placed them in jeopardy of not being heard before the committee’s April 13 closing date. One Republican voted with Democrats and another abstained in order to let the two-week proposal fail. The bills sponsored by Senator Eric Stewart are now scheduled to be heard Wednesday, March 30.

Open Records

Senator Roy Herron successfully amended a bill Monday to require that foundations that contract with the University of Tennessee be required to hold open meetings and maintain publicly accessible financial records. Senate Bill 336 authorizes the UT Board of Trustees to designate and enter into agreements with foundations designed to raise money and support the university. Herron’s amendment requires that most meetings of the foundation be open to the public, and that all expenditures by the foundations be made public record.

Such oversight is crucial given past problems with the UT Foundation, which a 2003 audit found that the foundation could be used to circumvent accountability laws for public funds and assets. Former UT President John Shumaker was forced to resign amid ethical and financial violations involving the foundation.

Race to the Top and Complete College Updates

Several updates on the Complete College Tennessee Act were presented to the Education Committee on Wednesday. A spokesperson for the Tennessee Higher Education Commission outlined that the state is seeking to improve its higher-education standards through a new funding formula based on outcomes in lieu of enrollment; a Performance Funding program that focuses on quality assurance; and the establishment of institutional mission statements to reduce redundancy in programs.

A presentation was also given updating the committee on Tennessee’s First to the Top initiative. The presentation outlined new programs aimed at helping Tennessee improve its K-12 education, including the creation of a comprehensive student information database that is accessible to every teacher in the state and a new emphasis on recruiting and retaining good teachers.

Communications

Thursday the Senate passed Senate Bill 598 with a compromise amendment that gives rural telephone companies more time to reduce their intrastate connection rates. The bill was initially resisted by rural phone companies but supported by large telecommunication companies such as AT&T. Under the new amendment, both sides have agreed to support its passage in both houses.