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Business and Economy News Tax and Budget

Ramsey’s Office: GOP Budget Plan Not Yet Ready

Senate Republicans who say they want government to live within its means, and at the same time oppose new or higher taxes, are backing off assurances they made last week that they’ll release fresh budget-cutting proposals this week.

GOP lawmakers may need a few more days before pitching alternatives to the tax hikes favored by the governor and Capitol Hill Democrats, according Lance Frizzell, Senate Speaker Ron Ramsey’s spokesman.

Frizzell said Monday the GOP caucus probably won’t present any concrete spending-reduction strategies for avoiding tax increases until Gov. Phil Bredesen releases a series of budget bills.

Frizzell told TNReport that lawmakers are waiting to see Gov. Phil Bredesen’s omnibus bill — which addresses changing certain codes in order to pass a budget — and a so-called “technical corrections” bill that details his proposed tax increases or methods for closing other loopholes.

The technical corrections bill is out, according to the governor’s office. That bill, SB3901, is public, but amendments have not been added to that bill yet, according to the state’s legislative website.

“Everything we have proposed is either in the budget or has been discussed at length with the legislative leadership,” Lydia Lenker, Bredesen’s spokeswoman, said in an email.

Typically, the omnibus bill isn’t filed by this point in the legislative session, said a Department of Finance and Administration spokeswoman, who added that this year’s bill won’t be introduced until the Bredesen administration fully crunches the revenue projections it received from the State Funding Board.

Frizzell said Republicans may not propose their own version of a budget package until later this week or possibly the week after.

Lawmakers originally planned to vote on a budget by the end of April. Officials now say they expect to work through much of May hammering out a spending and revenue plan agreement.

Bredesen said the budget he proposed back in February needs at least another $105 million in additional funding or new cuts, since state revenue collections are failing to meet predictions.

In order to generate $85 million so state government doesn’t have to rein in spending any more than he’s already proposed, Bredesen has suggested raising the rate at which big-ticket purchases — single items that ring up for $3,200 or more — are taxed.

But Senate Republicans have denounced that idea. They argue that a tax increase right now would further stress Tennessee’s distressed economy. So far, however, GOP lawmakers have refused to offer specific cuts to government spending that they prefer instead of tax increases.

Bredesen, who has less than a year left in office, has said he is open to compromises, but will not support reductions to government education funding, including Pre-K programs.

Frizzell said GOP leaders may run their budget ideas past Bredesen at their weekly breakfast meet-up on Wednesday.

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News

Bredesen’s Latest Tax Hike Plan Likely DOA

Tennessee Republicans say they have no interest in adopting Gov. Phil Bredesen’s proposed increase in the sales-tax rate on big-ticket purchases in place of deeper cuts to government spending.

They instead plan to release their own proposal by Tuesday that they promise will pare down next year’s budget to better line up with projected revenues.

Lt. Gov. Ron Ramsey, a Blountville Republican and a candidate for governor, has been one of the most vocal critics of Bredesen’s plan, which is to sponge up another $85 million from the private sector next year by lifting the tax cap on individual items that ring up for over $3,200, excluding vehicles, boats and manufactured homes.

Ramsey argues that the governor’s proposal to boost the tax-rate from 7 percent to 9.75 percent on the class of items targeted will hammer small businesses already struggling just to stay afloat and make payroll.

House Republicans jumped in behind Ramsey Wednesday, echoing his sentiments that a substantial tax hike now basically couldn’t come at a worse time.

“The Governor is showing a blatant disregard for the challenges small business owners and average Tennesseans face,” said House Majority Leader Jason Mumpower, a Republican from Bristol. “As the economy is struggling mightily, this would do nothing but provide a setback for recession-weary Tennesseans.”

Ramsey declined in an interview Wednesday with TNReport to even hint at the types of cuts GOP lawmakers will propose to make budgetary ends meet.

But Rep. Beth Harwell, R-Nashville, chairwoman of the House Commerce Committee, said more government layoffs and program reductions are all but inevitable.

“It may mean some fewer state employees. It may mean some programs being scaled back. Certainly no additional, new programs,” she said. “Certainly, I think the legislature needs to understand that there is not going to be any pork projects, any projects to take home to the district.”

The additional revenues Bredesen has proposed snaring would be used to fill the $105-million-and-likely-growing budget hole lawmakers are staring through for the next fiscal year.

“To be realistic, (the plan) is more of a business tax,” Bredesen said of his proposal. Administration spokespersons have taken pains to point out that “luxury items” — such as jewelry, furs and high-priced furniture — are among the products the governor is seeking to tax at a higher rate.

Department of Revenue estimates suggest that last year, of the types of purchases the governor wants to tax at a higher rate, 70 percent were wholesale and service-company transactions. Those purchases typically involve businesses buying from other businesses, or companies paying sales taxes on products — like office furniture, machinery or other equipment — after the fact, said Reagan Farr, Department of Revenue commissioner.

The remaining 30 percent of high-priced purchases fell on the shoulders of consumers last year, he said. About 15 percent of sales over $3,200 were rung up at miscellaneous retail stores selling items such as cameras and jewelry. Another 15 percent came from stores selling building materials and furniture, according to Farr.

Legislative Democrats have generally voiced support for Bredesen’s idea, saying that in the absence of a GOP proposal, it’s the best anybody’s put forward.

“I think the governor is trying to lead us through a very difficult economic time and I certainly think lifting that exemption is fairer than any alternative that I’ve heard presented,” said Rep. Mike Stewart, D-Nashville, who sits on both the House Commerce and Joint Business Tax committees.

Ramsey said he expects the Senate to approve a Republican-backed budget roughly a week after it’s proposed. He then plans to put a hold on Senate action to allow members a break to return to their districts until the House passes its version of the state’s spending package.

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Press Releases

House GOP Leadership Officially Denounces $85M Tax Increase

Press Release from the House Republican Caucus; April 21, 2010:

(April 21, 2010, NASHVILLE) – The House Republican Caucus leadership today called upon Governor Phil Bredesen to stop proposing new tax increases as a way to balance the budget. Republican leadership’s announcement comes after the administration proposed another $85 million in tax increases on Wednesday by increasing the sales tax on single article sales.

“The Governor is showing a blatant disregard for the challenges small business owners and average Tennesseans face,” said House Majority Leader Jason Mumpower. “As the economy is struggling mightily, this would do nothing but provide a setback for recession-weary Tennesseans.”

Last week, Bredesen and his senior staff outlined a plan to remove the sales tax cap on single article sales. At present, the value of individual items over $3,200 are taxed at seven percent. The governor wants to increase this to 9.75 percent.

“Tennesseans are tired of hearing the Bredesen Administration telling them this simply ‘closes a loophole’ or ‘streamlines’ the tax structure. The bottom line is that this proposal is an $85 million tax increase on hardworking Tennesseans,” said House Republican Caucus Chairman Glen Casada. “Small businesses can and will be the driving force behind economic recovery, so we cannot put them in the crosshairs of this massive tax increase.”

The $85 million tax increase would be in addition to $50 million the administration has called for by increasing taxes on cable television, cable television boxes, business telephone services, and free hotel breakfasts. In total, Bredesen has proposed over $130 million in new taxes this year alone.

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News Tax and Budget

Despite State Budget Woes, Gov’t. Employee Bonuses Still Likely

Gov. Phil Bredesen’s proposed 3 percent bonus for state employees doesn’t appear to be in Senate Republicans’ crosshairs, even as other spending cuts and tax hikes are contemplated to close a $105 million hole in next year’s state budget.

Lawmakers will spend the next few weeks hammering out the final details of next fiscal year’s state budget. Bredesen proposed a $28.4 billion spending package back in February, but downward revenue forecast adjustments raised the specter of additional tax increases or spending reductions beyond what he originally planned are likely coming up for debate.

Nevertheless, the governor still stands firm behind his pledge to offer state employees — from Capitol Hill janitors, department administrators and educators at all levels — a 3 percent pay bonus, a spokeswoman for the administration said Friday.

It “remains in the governor’s budget proposal,” spokeswoman Lydia Lenker wrote in an email.

Bredesen also this week pitched the idea of raising the sales tax rate on items over $3,200 in order to rake in roughly $85 million more from the private sector. Those funds, he said, would help close a growing gap between available funds and what he wants to spend in the next budget cycle.

Lt. Gov. Ron Ramsey, a GOP candidate in a competitive race for governor, has said “everything’s on the table” in order to balance next year’s budget. He added, however, that he doesn’t see the logic in stripping away the state employee bonuses to put the money elsewhere. The state would just have a new hole to fill next year, he said.

“That bonus won’t help anything much, anyway. That’s one-time money being used for one-time expenses. We’re looking for recurring money,” Ramsey said.

He promised though that the Senate under his guidance will “push back” against Bredesen’s tax increase.

“We will not have that here in the state of Tennessee,” he said.

If the Legislature refuses to adopt the governor’s sales tax increase without offering up any other viable options, Bredesen said he’s got his own cuts in mind, including possibly lopping 5 percent off those same state employees’ salaries, excluding K-12 teachers.

The bonus would cost $164.7 million and is said to come from a fund that won’t necessarily be filled again next year. State employees have been on a pay freeze for the last three years. Their last bonus, $400, was handed out two years ago.

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Press Releases

Dish Companies: Satellite Customers Unfairly Penalized

Press Release from McNeely Pigott & Fox, representing Satellite Broadcasting & Communications Association, Dish Network and DirecTV.

Cable Tax Exemption Harms Tennessee Businesses

NASHVILLE, Tenn. – The state’s approximately 800,000 satellite customers are being unfairly penalized, simply because they chose satellite over cable, say representatives of the state’s satellite retailers.

For the past 11 years, cable companies and their customers have been exempt from paying sales taxes on the first $15 of their monthly cable bills. That tax exemption is not available to satellite customers – approximately one-third of the state’s population – who must pay taxes on their entire bill. The tax also harms satellite dealers who are competing against cable for customers.

Gov. Phil Bredesen’s budget proposal calls for eliminating cable’s tax exemption, which would produce nearly $21 million in badly needed new revenue for law enforcement, higher education and agriculture. Without the new revenue, critical services will be eliminated. The state’s district attorneys estimate that at least 17 prosecutors, 20 victim witness coordinators and 25 other law enforcement positions could be cut if new revenue is not found.

“The tax exemption for cable companies is unfair and stifles competition,” said Joe Widoff, executive director of the Satellite Broadcasting and Communications Association. “Our customers, many of whom live in rural areas and do not have access to cable, are suffering the consequences of a mistake made by the legislature 11 years ago. This inequality needs to be stopped this year.”

If the tax exemption were eliminated, consumers would pay a mere $1.35 extra per month on their cable bill. That amount is equal to the price of a soft drink, something many Tennesseans purchase on a daily basis.

The state’s satellite companies have filed a lawsuit against the state of Tennessee because the state unfairly penalizes their customers with a tax that cable customers don’t pay. If the state loses the lawsuit, and the claim is fully awarded, taxpayers may be on the hook for nearly $100 million in tax refunds to satellite subscribers.

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Press Releases

Sen. Barnes, Rep. Pitts Support Fair Taxation For Tennessee Farmers

Press Release from Sen. Tim Barnes, D-Adams, and Rep. Joe Pitts, D-Clarksville, March 18, 2010:

Bill would protect farm land from massive estate tax hikes

NASHVILLE – Sen. Tim Barnes (D-Adams) and Rep. Joe Pitts (D-Clarksville) want to protect farmers from unfair property valuation by sponsoring a bill to limit the effect of exorbitant appraisals.

“I’m hearing from farmers who are in danger of losing family farms because they face high federal estate taxes due to high appraisals,” Barnes said. “We must do all we can to protect our farmers who form the agricultural backbone of our economy.”

The bill (SB3191/HB3448) would make Tennessee farms’ “highest use value” available only for computing state rollback taxes – not for use in values for estate taxes, as the current law interprets. Many farmers are being taxed based on the state’s assessment of the land’s development value, even if the property is impossible to develop or has been restricted to farm use through a will.

Barnes and Pitts sponsored the bill after hearing from Montgomery County farmers who have seen their farm appraisal rates increase more than 700 percent after the most recent reappraisals.

“Sen. Barnes and I were made aware of this problem by Betty Burchett, our Montgomery County Property Assessor, and members of the local Farm Bureau,” Rep. Pitts said. “This proposal hopefully will make her job easier by putting farmers’ minds at ease.”

The legislation passed in the Senate State and Local Government Committee on Wednesday. The House version is scheduled for a subcommittee hearing next week.

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News

December Revenues $16.1M Less Than State Expected

The state collected more tax revenues in December than it did the last month of 2008 — possibly signaling that lackluster tax revenues could be inching closer to a turnaround, officials said Wednesday.

But revenues were still $16.1 million down for December, marking the twentieth month tax collections missed the mark for budget estimates.

“Better news, not good news. But maybe we’re at last starting to see some sort of turn,” said Finance and Administration Commissioner Dave Goetz.

Much of the growth came from franchise and excise tax revenues along with car sales, according to Goetz.

Tax collections represent a huge chunk of state revenues that pay for public services, programs and other state spending. Tennessee officials expected to see $10.2 billion in tax revenues this year, roughly a third of the money needed to fund the year’s state budget, according to state budget documents.

The consistently weak revenue collections have created a $1.5 billion hole in this year’s budget. Lawmakers will have until June 30, the end of the fiscal year, to fill that hole.

Although tax collections were down from expectations, revenues topped off at $947.4 million for December activity, surpassing last year’s revenues of $936.3 million. The tax revenues were collected in January.

Here’s a breakdown:

  • Sales taxes were $20.4 million less than estimated.
  • Franchise and excise taxes combined coasted $11.3 million above budgeted projections.
  • Gasoline and motor fuel collections were $4.2 million below budget.
  • Tobacco tax revenues were $451,000 above estimates.
  • Inheritance and estate taxes raked in $1.8 million more that projected.
  • All other taxes were under collected by a total of $5.1 million.
  • Car sales grew from 2.8 percent in November, to 6.65 percent in December and 6.54 percent in January.

“The numbers are not good. It’s due to this economy and hopefully we’ll start pulling out of this recession,” said former House Speaker Rep. Jimmy Naifeh, D-Covington.

Sales taxes were down by 1.86 percent in December, which alone represents a $12 million falloff from revenue expectations, according to the Department of Finance and Administration.

“It is nice to see the gap has closed somewhat, but it’s kind of disappointing that this was the tax revenue from the Christmas season when you really had the hope maybe there’d be a big bump,” said Rep. Bill Dunn, R-Knoxville. “It’s moving in the right direction, but it’s still not good news,”

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Press Releases

December State Tax Collections Down

State of Tennessee Press Release, Jan 13, 2010:

NASHVILLE – The state’s fiscal year continues its trend of negative tax revenue growth, with tax collections falling below budgeted estimates again in December. Finance and Administration Commissioner Dave Goetz today announced that state revenue collections for December – reflecting November retail sales activity – were $766.7 million, which is $54.2 million less than the state budgeted.

“December tax collections represent the 19th consecutive month of negative sales tax growth,” Goetz said. “At the end of the fiscal year, on June 30, we’ll have to adjust for any under collection in the current fiscal year, and make sure our budget for fiscal year 2010-2011 reflects the revenue base available moving forward.”

On an accrual basis, December is the fifth month in the 2009-2010 fiscal year.

The general fund was under collected by $50.8 million and the four other funds were under collected by $3.4 million.

Sales tax collections were $16.6 million less than the estimate for December. The December growth rate was negative 2.88%. For five months revenues are under collected by $138.6 million, and the growth rate is negative 6.65%.

Franchise and excise taxes combined were $29.5 million below the budgeted estimate of $143.8 million. For five months revenues are under collected by $5.4 million.

Gasoline and motor fuel collections for December decreased by 2.70% and they were $4.3 million below the budgeted estimate of $66.7 million. For five months revenues are under collected by $9.9 million.

Tobacco tax collections were $5.6 million below the budgeted estimate of $25.7 million, and for five months they are $3.8 million above the budgeted estimate.

Inheritance and estate taxes were over collected by $2.6 million for the month.

All other taxes were under collected by a net of $800,000.

Year-to-date collections for five months were $169 million less than the budgeted estimate. The general fund was under collected by $147.1 million and the four other funds were under collected by $21.9 million.

The budgeted revenue estimates for 2009-2010 are based on the State Funding Board’s consensus recommendation adopted by the second session of the 106th General Assembly in May of 2009. and are available on the state’s Web site at http//www.tn.gov/finance/bud/budget.html.

http://news.tennesseeanytime.org/node/4428

December Revenues
Released on Wed, Jan 13, 2010 – 11:15 am under

* Finance and Administration

NASHVILLE – The state’s fiscal year continues its trend of negative tax revenue growth, with tax collections falling below budgeted estimates again in December. Finance and Administration Commissioner Dave Goetz today announced that state revenue collections for December – reflecting November retail sales activity – were $766.7 million, which is $54.2 million less than the state budgeted.

“December tax collections represent the 19th consecutive month of negative sales tax growth,” Goetz said. “At the end of the fiscal year, on June 30, we’ll have to adjust for any under collection in the current fiscal year, and make sure our budget for fiscal year 2010-2011 reflects the revenue base available moving forward.”

On an accrual basis, December is the fifth month in the 2009-2010 fiscal year.

The general fund was under collected by $50.8 million and the four other funds were under collected by $3.4 million.

Sales tax collections were $16.6 million less than the estimate for December.  The December growth rate was negative 2.88%. For five months revenues are under collected by $138.6 million, and the growth rate is negative 6.65%.

Franchise and excise taxes combined were $29.5 million below the budgeted estimate of $143.8 million. For five months revenues are under collected by $5.4 million.

Gasoline and motor fuel collections for December decreased by 2.70% and they were $4.3 million below the budgeted estimate of $66.7 million.  For five months revenues are under collected by $9.9 million.

Tobacco tax collections were $5.6 million below the budgeted estimate of $25.7 million, and for five months they are $3.8 million above the budgeted estimate.

Inheritance and estate taxes were over collected by $2.6 million for the month.

All other taxes were under collected by a net of $800,000.

Year-to-date collections for five months were $169 million less than the budgeted estimate. The general fund was under collected by $147.1 million and the four other funds were under collected by $21.9 million.

The budgeted revenue estimates for 2009-2010 are based on the State Funding Board’s consensus recommendation adopted by the second session of the 106th General Assembly in May of 2009. and are available on the state’s Web site at http//www.tn.gov/finance/bud/budget.html.http://news.tennesseeanytime.org/node/4428

December Revenues

Released on Wed, Jan 13, 2010 – 11:15 am under

* Finance and Administration

NASHVILLE – The state’s fiscal year continues its trend of negative tax revenue growth, with tax collections falling below budgeted estimates again in December. Finance and Administration Commissioner Dave Goetz today announced that state revenue collections for December – reflecting November retail sales activity – were $766.7 million, which is $54.2 million less than the state budgeted.

“December tax collections represent the 19th consecutive month of negative sales tax growth,” Goetz said. “At the end of the fiscal year, on June 30, we’ll have to adjust for any under collection in the current fiscal year, and make sure our budget for fiscal year 2010-2011 reflects the revenue base available moving forward.”

On an accrual basis, December is the fifth month in the 2009-2010 fiscal year.

The general fund was under collected by $50.8 million and the four other funds were under collected by $3.4 million.

Sales tax collections were $16.6 million less than the estimate for December. The December growth rate was negative 2.88%. For five months revenues are under collected by $138.6 million, and the growth rate is negative 6.65%.

Franchise and excise taxes combined were $29.5 million below the budgeted estimate of $143.8 million. For five months revenues are under collected by $5.4 million.

Gasoline and motor fuel collections for December decreased by 2.70% and they were $4.3 million below the budgeted estimate of $66.7 million. For five months revenues are under collected by $9.9 million.

Tobacco tax collections were $5.6 million below the budgeted estimate of $25.7 million, and for five months they are $3.8 million above the budgeted estimate.

Inheritance and estate taxes were over collected by $2.6 million for the month.

All other taxes were under collected by a net of $800,000.

Year-to-date collections for five months were $169 million less than the budgeted estimate. The general fund was under collected by $147.1 million and the four other funds were under collected by $21.9 million.

The budgeted revenue estimates for 2009-2010 are based on the State Funding Board’s consensus recommendation adopted by the second session of the 106th General Assembly in May of 2009. and are available on the state’s Web site at http//www.tn.gov/finance/bud/budget.html.