Democrats target sales tax loopholes

Democrats target sales tax loopholes

May 20th, 2009 by Andy Sher in News


$1.3 billion to $1.4 billion: Projected state budget shortfall for the 2009-10 fiscal year

$1.1 billion: Previously projected shortfall

$160 million to $306 million: Amount the state now will need to cut for a balanced budget

$6 billion: Total state sales tax exemptions. House Democrats are eyeing closing off some to obtain more revenue.

NASHVILLE - House Democrats are discussing closing some sales tax loopholes to help offset the need to slash another $200 million in spending from the 2009-10 state budget that starts July 1.

"No one wants to raise taxes, I mean, at all. But we're in unprecedented times," said House Democratic Caucus Chairman Mike Turner, who noted his members increasingly fear the impact of cuts on services.

Rep. Turner said the state has an estimated $6 billion in services and items not subject to the state's 7 percent sales tax. He did not cite a specific figure. A state income tax is "off the table," he said, as is a general sales tax increase.

His comments came after House Democrats' closed-door meeting with Finance Commissioner Dave Goetz in which he outlined the state's recession-driven fiscal woes.

Mr. Goetz later said that while the Bredesen administration is not proposing new tax increases to offset additional cuts, he is not ruling out some sort of "small" increase.

"I think there's a tremendous amount of concern over very specific things such as dealing with mental health and children's services," Mr. Goetz said, later asking, "could something small be done that might help those? I don't know. I think we're waiting to hear what the legislators think about what they want to do."

Raising taxes is running into opposition from Republicans including House GOP Leader Jason Mumpower, of Bristol, who said he is not interested in raising taxes beyond what Democratic Gov. Phil Bredesen outlined in his March budget presentation.

"I would say that we would believe this would be a pretty bad time to try to put increased taxes on the people of this state who are already suffering," Rep. Mumpower said.

The House is split evenly, 49 to 49, between Democrats and Republicans. It is presided over by House Speaker Kent Williams, of Elizabethton, who was bounced out of the Republican Party after he joined with Democrats to become speaker.

The Senate is firmly controlled by Republicans, who enjoy a 19-14 majority there. Last week, Lt. Gov. Ron Ramsey, R-Blountville, the Senate speaker, indicated his opposition to tax increases.

"I don't think that's going to fly," he said.

Latest revenue estimates indicate an additional general fund shortfall of between $161 million to $306.6 million in the 2009-10 fiscal year beginning July 1. Most lawmakers cite a $200 million figure.

The administration earlier projected a shortfall of about $1.1 billion. Gov. Bredesen, a Democrat, proposed a combination of cuts, about $165 million in tax increases, use of reserves and federal stimulus funds to deal with recession-driven problems over a three-year period.

Lawmakers are waiting for a major administration amendment taking into account the new economic realities and additional cuts. But an "overview" of that is not expected until late next week and no detailed amendment until June 1, Rep. Mumpower said.

Later on Tuesday, Speaker Williams and top House Democratic and Republican leaders met with Mr. Goetz.

Speaker Williams said he was "not very happy" with the need to slash more, saying he, too, worries about the impact on services. He suggested if the additional shortfall is in the $160 million range, the state could use a "patch" in the form of money from the "rainy day" contingency reserve fund.

The prospect of more cuts has induced near-panic in some areas, especially mental health, where community-based services already face cuts of $6.7 million by the end of 2009-2010.

After listening to Mr. Goetz earlier, Rep. Tommie Brown, D-Chattanooga, said, "Right now, I'm really feeling frightened and lost." She said she intends to seek information about how other states have handled their recession-generated predicaments.