Republican leaders balk at tax increases to save employee jobs

Republican leaders balk at tax increases to save employee jobs

February 3rd, 2010 by Andy Sher in News

NASHVILLE -- Gov. Phil Bredesen's proposal to raise $21.3 million by increasing sales taxes on cable television bills and subjecting cable boxes to use taxes is getting static from Senate Speaker Ron Ramsey and other GOP legislative leaders.

"I don't think that ends up passing the General Assembly," Sen. Ramsey, R-Blountville, said.

The proposal is part of $71.7 million in tax and fee increases Gov. Bredesen, a Democrat, says are needed to avoid cutting an additional 341 state employees in the $28.41 billion 2010-2011 budget he outlined on Monday.

One administration plan, which includes the cable sales tax increase, raises $49.8 million to prevent what administration officials say otherwise would be 200 layoffs involving assistant prosecutors, witness coordinators, public defenders, probation officers and foresters.

The proposal also increases rates on businesses for interstate and international calls to match those of residential users, raising $6.5 million. Other provisions would raise $20 million, including $10 million from closing off a state excise tax exemption for private real estate investment trusts.

House Majority Leader Jason Mumpower, R-Bristol, said he is concerned about the proposed tax increases and would look for ways to eliminate them.

" I just think that it's the wrong thing at the wrong time, and I believe that's how my caucus will feel as well," he said.

Sen. Ramsey said that while he is opposed to the cable provisions, he wants to learn more about the other tax provisions.

Both Sen. Ramsey and Rep. Mumpower, however, said they do not object to a separate $21.9 million provision that increases the cost of a state driver license for the first time since 1988. Fees would go from $19.50 every five years to $46 every eight years.

Administration officials say the $21.9 million it raises would keep 85 state troopers and 56 driver license station workers from being laid off and also help the agency replace its problem-plagued radio communications system as well as a license issuance computer system.

Sen. Ramsey said the driver license fee increase "is going to be directed to keeping state troopers employed as well as buying a radio system. You've got a dedicated fee to a dedicated fund. Usually (on) user fees, I'm pretty well open to those. Now on the taxes, that's simply going to put a tax on the cable bills and put a tax on the cable boxes."

Senate Majority Leader Mark Norris, R-Collierville, said there is some concern about increasing fees or taxes on Tennesseans.

"We need to understand their (Bredesen officials') thinking," he said.

State revenue Commissioner Reagan Farr said the cable television tax proposal comes in response to a lawsuit filed by satellite television companies.


Gov. Bredesen's 2010-2011 budget impact on state jobs:*

* The governor is proposing eliminating permanent funding for 1,363 filled jobs and 456 vacant positions. He wants to use one-time funds over two years to maintain the jobs of 314 workers plus 80 others whose jobs already have been cut in the current budget.

* In addition, Gov. Bredesen is recommending $71.7 million in tax and fee increases to keep from laying off another 371 workers including state troopers and assistant district attorneys.

Source: State finance department

The companies, he said, contend the state unfairly treats them by subjecting their customers, many who live in rural areas, to the state's full 7 percent sales tax on all bills. But if a cable customer has a bill of $15 or less, it is exempted from state and local sales taxes. Taxes then are phased in

relation to the amount of the cable bill.

Cable companies successfully lobbied the "special deal" through years ago, said Mr. Farr, who warned the state may lose the lawsuit.

Sen. Norris said lawmakers should examine how much it would cost to give satellite companies the same treatment as cable companies.

Mr. Farr questioned that, noting that could put the state, which already faces making $394 million in permanent cuts, further in the hole by as much as $15 million. He noted Tennessee already taxes things such as baby formula.

"Cutting revenues in this situation so satellite (companies) can have a tax break ... I would just say that's a political decision and that's the legislature's prerogative," Mr. Farr said. "But it's not one we would recommend."