Gov. Haslam's Revenue Modernization Act draws praise, study

Gov. BIll Haslam, left, leads a discussion at Tennessee's Education Summit Thursday, Sept. 18, 2014, in Nashville, Tenn. Representatives of local governments, school systems and businesses are taking part in the summit, along with state senators and representatives. At right is Lt. Gov. Ron Ramsey, R-Blountville. (AP Photo/Mark Humphrey)

NASHVILLE -- Republican state Senate Speaker Ron Ramsey said Tuesday he's willing to give a fair hearing to Gov. Bill Haslam's proposed "Revenue Modernization Act," which the Republican governor says is necessary to address inequities between in-state and out-of-state businesses on some taxes.

"If it's about leveling the playing field and it'll make sure that out-of-state businesses are paying what they're supposed to be paying now, I'm all for it. But," Ramsey emphasized, "I've not seen any details."

Haslam pitched the proposal to the General Assembly Monday night in his State of the State address. He said it stemmed from his administration's examination of why last year's business tax collections fell off a cliff last year. That forced the governor to make huge spending cuts and cancel planned pay raises for teachers and state employees.

State government and outside experts looked at the issue and concluded some of it was due to the "natural volatility" of the state's franchise tax, which operates like a property tax, and the excise levy on taxable corporate income. Part was due to the fact the taxes are paid in anticipation of actual revenues and often result in later requests for refunds when profits don't materialize, Haslam said.

And, Haslam said, "some of it is that companies outside of Tennessee, but that do business in Tennessee, aren't always required to pay the same taxes that our in-state and homegrown companies do."

Through analysis, the governor said, "we found that Tennessee has fallen behind other states in protecting our in-state businesses from unfair competition from out-of-state companies." He said his proposal "aims to level the playing field in terms of sales tax and business taxes."

Another provision, Haslam said, capitalizes on trends Tennessee is seeing in "product distribution by creating an incentive for companies to use Tennessee's distribution industry, which maximizes our state's strengths."

Haslam emphasized "we are committed to Tennessee remaining a low-tax state. This proposal simply brings us in line to better compete with other states and to not put our in-state businesses at a disadvantage, which we are doing today."

The bill would net $20 million.

It's the first such bill the Haslam administration has brought. Former Democratic Gov. Phil Bredesen's administration was famous with bringing little-understood, last-minute "technical corrections" bills to lawmakers. The bills generally addressed what the administration considered "loopholes" and usually raised revenue.

"I will commend him on this," Ramsey said of Haslam. "Gov. Bredesen used to bring that 'technical correction' bill the last day of session and we'd have to try to figure out what it was. At least this is something he already has a plan on -- and I've not even seen it. All I know is what [Haslam] said and in a little budget briefing he brought it up."

Tennessee Chamber of Commerce and Industry officials are also eyeing the proposal. In a statement, President Catherine Glover said the group "has begun its review of Gov. Haslam's proposed budget, as well as a number of proposed business-targeted tax changes. On behalf of our members, the Tennessee Chamber is determining their overall economic impact on our state."