published Wednesday, January 11th, 2012

Tennessee Gov. Bill Haslam wants to lower food, inheritance taxes

  • photo
    Gov. Bill Haslam, center, talks about his legislative agenda on the opening day of the second session of the 107th General Assembly on Tuesday in Nashville. Among those appearing with him are House Speaker Beth Harwell, R-Nashville, left, and Rep. Sheila Butt, R-Columbia, lower right.
    Photo by Associated Press /Chattanooga Times Free Press.

NASHVILLE — Gov. Bill Haslam announced Tuesday that his legislative package of bills includes plans to begin reducing Tennessee's sales tax on food and raising the exemption on the state's inheritance tax.

Haslam also said he wants to overhaul the civil service system for state workers to make it easier to hire and fire employees, to let school systems offer merit pay to teachers, to boost the state's FastTrack grant incentive program for businesses and to restructure 22 boards and commissions, including the Tennessee Regulatory Authority.

"The issues we are going to bring up today focus on things that matter for Tennesseans, helping us move forward," Haslam said at an event that started with a rally with his supporters and administration, then was followed by a news conference.

Earlier in the day, Haslam briefed House and Senate Republicans on his proposals.

A Republican, Haslam said he is asking lawmakers to reduce the state's 5.5 percent sales tax on food to 5.3 percent, costing about $18 million annually. The goal is to get the tax down to 5 percent in three years.

Haslam also wants to raise the exemption on inheritance taxes from $1 million to $1.25 million, a "first step" toward eventually raising the exemption to $5 million. This year's move would cost the state $14 million in revenue.

The governor recently was lukewarm about acting now to raise inheritance tax exemptions as well as another proposal to begin reducing the state's Hall Income Tax on bond interest and stock sales. The state couldn't afford those reductions given the state's continuing recovery from the Great Recession, he previously said.

Higher inheritance tax exemptions have been championed by House Speaker Beth Harwell, R-Nashville, while Senate Speaker Ron Ramsey, R-Blountville, favors chipping away at the Hall Income Tax.

Haslam now is siding with Harwell, a close ally, on the inheritance tax.

"We found a way to take a manageable bite" out of inheritance taxes and, secondly, revenues have improved, the governor told reporters. State departments also did a better job than expected in "budget control last year where they had turned in more money than asked," he said.

As for reducing the food tax, which has been rejected by Ramsey, Haslam said, "if we're going to lower taxes for Tennesseans, that's the only way to touch every Tennessean in a significant way."

He said he also wants to make it easier to hire and fire state employees and offer merit pay to higher-performing workers. And he is recommending money be set aside to study state workers' overall pay.

Tennessee State Employees Association officials already are critical about some parts of the plan, warning it could return Tennessee to the days of political "patronage" when governors could act with impunity.

"We like the pay study," said Robert O'Connell, executive director of the Tennessee State Employees Association, but the group wants to study the changes to hiring and firing practices.

"We fought long and hard quite a while ago to win those civil service rights to protect all Tennesseans from the scourge of patronage and cronyism, which is what comes when you eliminate those civil service protections in hiring ... and eventually firing," he said.

In yet another area, Haslam said he wants to strengthen the Department of Economic and Community Development's FastTrack program by putting more money into the effort and providing more flexibility to help companies in areas such as site preparation and relocation expenses.

Another Haslam bill restructures 22 state boards and commissions, including the Tennessee Regulatory Authority, which oversees rate increase requests from some for-profit utilities such as Tennessee American Water.

Haslam is proposing a five-member, part-time board for the TRA and creating an executive director who would be appointed by the governor. The current board has four full-time members. Part-time board members would be paid, Haslam said, but cost savings could go toward hiring better experts.

Haslam also said he wants to appoint the executive director of the Tennessee Higher Education Commission and have him or her report directly to the governor.

about Andy Sher...

Andy Sher is a Nashville-based staff writer covering Tennessee state government and politics for the Times Free Press. A Washington correspondent from 1999-2005 for the Times Free Press, Andy previously headed up state Capitol coverage for The Chattanooga Times, worked as a state Capitol reporter for The Nashville Banner and was a contributor to The Tennessee Journal, among other publications. Andy worked for 17 years at The Chattanooga Times covering police, health care, county government, ...

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