Governor candidates discuss tax issues

Editor's note:

Below are complete responses from the major candidates in the 2010 gubernatorial race to questions on taxes.

The answers were by compiled for the Tennessee Newspaper Network, a content-sharing coalition that includes the Chattanooga Times Free Press and

newspapers in Memphis, Nashville and Knoxville.

Leading up to the Aug. 5 primary election, the Tennessee Newspaper Network has offered up questions and answers on issues of importance to Tennessee's next governor.

An edited version is in the print edition, but the complete version is presented below.

1) A) Would you favor any change in the current gasoline or diesel tax, such as raising the current per-gallon tax, making the tax a percentage of cost, or requiring annual cost-of-living adjustments?

Haslam: "It's important for our state to maintain a sound infrastructure, but we can't add to the burdens of Tennessee taxpayers. I will conduct a top-to-bottom review of the Tennessee Department of Transportation, along with all other state departments and agencies, to find ways to use taxpayer dollars more efficiently and effectively. I will carefully examine how much money is actually going towards servicing roads and bridges versus administrative functions and make sure our tax dollars are being spent on our highest priorities."

McWherter: "I would oppose raising taxes on gasoline and diesel. Unlike Mayor Haslam, whose Pilot Oil Company lobbied to create a 2.5 cent ethanol-blend subsidy that would directly benefit his bottom line, I believe that Tennesseans and visitors to our state are already being burdened enough at the pump."

Ramsey: "The last two Governors have raided over $260 million from Tennessee's road fund. That money should be fully restored before we have a conversation about new revenue. In recent years the legislature has put back over $27 million into the road fund. I will continue that work as Governor."

"The problem with our current road funding system is that the gasoline tax in place doesn't take into account higher CAFE standards from the federal government as well as hybrid or electric cars. These vehicles cause the same wear and tear on roads but use less and less gas. In the long term, the current funding mechanism simply won't work. As Lieutenant Governor, I appointed a study committee to study the funding of our road system so we can weigh our best options for a long term solution.

Wamp: "My priority will be to reform and right-size state government and not increase any taxes, including the gas tax. But clearly as more electric and hybrid vehicles continue to come online and we reduce the consumption of gasoline and diesel in our state, we must look at alternative ways to support our highways and bridges. This is an issue the federal government is also looking at, and if they move to change the highway funding formula then we would need to respond accordingly."

B) Would you favor toll roads or bridges in Tennessee for certain projects? Should the state own and/or operate these, or would you favor letting the private sector do so?

Haslam: "No."

McWherter: "I believe local municipalities and the citizens who would be impacted by the fees could best address this issue. I would be willing to take a closer look at this issue on a case-by-case basis where there is local support. I do not believe toll roads are the solution for infrastructure funding."

Ramsey: "I do not favor toll roads. Decisions about toll roads should be left to local communities and an alternative toll free route should be available to citizens who choose not to pay the toll."

Wamp: "I would continue to support toll road demonstration projects in special situations if voted on and approved by the legislature, but for now all such projects should continue under state oversight and ownership."

2) Would you favor broadening the sales tax base to include any currently exempted goods or services? If so, which ones?

Haslam: "No."

McWherter: "On principle, I am opposed to increasing any taxes."

Ramsey: "No."

Wamp: "Again, my first priority is to reform and right-size state government and oppose all tax increases, including any attempt to expand the sales tax that could make Tennessee less competitive or that might hurt working families."

3) Would you favor implementation of the "streamlined sales tax" system - or some other system - to apply state and local sales taxes to purchases by Tennessee residents over the Internet or by catalogs from out-of-state companies?

Haslam: "We should explore ways to make sure out-of-state companies are not given an advantage over Tennessee businesses."

McWherter: "I am against implementing any sort of new tax system that will place a higher burden on Tennessee taxpayers and small businesses. Where this creates a disadvantage for our existing retailers, I would work to protect their interests so that they have a level playing field."

Ramsey: "Now is not the time to implement the streamlined sales tax system. In a down economy, we need to make it easier for Tennesseans to purchase goods and services, not harder."

Wamp: "This is a complicated issue with many moving parts and interests to balance, including state sovereignty issues. But in principle, yes. Since we are a state dependent upon sales tax revenues and one that borders eight other states with lower sales taxes, we must work cooperatively with others to develop a system that levels the playing field for Tennessee retailers and prevents the loss of millions of dollars of state revenue each year. As an Associate Member of the Streamlined Sales and Use Tax Agreement (SSUTA), the State of Tennessee needs to be an active participant in making any such a system work for both our taxpayers and our retailers."

4) Would you be willing to increase the sales tax for any reason as governor? Are you ruling out any sales tax increases?

Haslam: "I will not increase the sales tax as governor. We already have the highest combined state and average local rate in the nation. Tennessee families and businesses have been forced to cut back during this recession, and state government must do the same."

McWherter: "The citizens of Tennessee already pay one of the highest sales tax rates in the country, and I don't believe we should increase the burden on working families. On principle, I am opposed to tax increases."

Ramsey: "No. I am ruling out sales tax increases."

Wamp: "Our combined state and local sales tax rate is high enough, so I would oppose any attempt to raise the state sales tax. Instead, we must right-size state government, cut costs and aggressively work to grow our state economy as the best way to balance our state budget."

5) Gov. Bredesen's administration each year has pushed for legislation making tax-code changes with the stated goal of eliminating "loopholes" that companies have found to legally evade paying taxes. Would you continue this practice, and how do you differentiate between using this to raising taxes versus closing off a loophole?

Haslam: "As governor, I would enforce the law. When situations arise where folks find ways around the intent of a law and it can be addressed legislatively, I will support doing so. However, I will not use this as a backdoor means of raising taxes, but only as a way to make sure the intent of the law is being carried out effectively."

McWherter: "Tennesseans are tired of corporate interests being placed above those of working women and men across this state. If these loopholes were strategically crafted and lobbied into place by corporate special interests, I would work to close the loopholes. There is a difference between tax evasion and raising taxes on businesses."

Ramsey: "Tax-code changes should be brought as stand-alone legislation so they can be evaluated individually. As Lt. Governor, I have worked very hard to implement strong pro-growth policies which promote low taxes and low regulation. The result is companies have been attracted to relocate to Tennessee and they've brought needed job opportunities for our citizens with them. Incentive packages and tax breaks to promote job growth can't be classified as loopholes. If we want to keep companies here and continue to attract new ones, we must remain competitive as a state and low tax rates play a major role in that."

Wamp: "I believe we must examine the tax code to ensure there are no illegitimate loopholes. However, I do not support simply increasing revenue through "closing loopholes," as much of the time they are nothing more than tax incentives to promote and encourage business and investment in our state. As governor, I will protect and fight for a low tax environment for small businesses and families in order to promote growth and economic development."

6) The state currently has an inheritance tax, which basically tracks federal law. Would you push for repeal or a change to this tax? If you eliminate it or cut it, how would you make up the lost revenue?

Haslam: "Once our economy has recovered and we have reduced the size of state government, I would support repealing the inheritance tax."

McWherter: "Given the current state of our budget, I can't commit to repealing the inheritance tax at this time. As we start creating more jobs and the economy gets back on track, my first piece of business will be to restore our rainy day fund. Just like small businesses and working families, we must build our savings account to make sure we have the resources needed to weather these turbulent economic times. The first tax I would seek to cut would be the grocery tax, because it directly impacts the family budget of every Tennessean."

Ramsey: "I am for repeal of the inheritance tax. It's not right that an individual works hard his or her whole life to create something of worth - a legacy - only to have it taken away by government upon death. I have sponsored legislation to increase the exemption $100,000 per year until such amount equals $3.5 million. Any lost revenue can be found in cutting down the size and scope of state government."

Wamp: "My first priority as Governor is to right-size state government and cut state spending while we recruit new business investment to grow our economy and increase state revenues. But as state revenues grow, we should look for ways to make Tennessee even more competitive by reducing taxes on working families and small businesses. A good place to start is with the inheritance tax."

7) Would you cut or eliminate Tennessee's current Hall Income Tax on certain investments? If so, how would you make up the lost revenue?

Haslam: "Once our economy has recovered and we have reduced the size of state government, I would support repealing the Hall tax."

McWherter: "The Hall Income Tax and the Inheritance Tax make up a small percentage of our state's overall budget and affect a small percentage of wealthy taxpayers. A cut to these taxes would not benefit the average Tennessee family, but finding a way to replace the lost revenue would. During these tough economic times, I would not propose cutting either of these taxes."

Ramsey: "I sponsored legislation this year to phase out the Hall Income Tax (HIT) by increasing the income exempted from the HIT for taxpayers 65 years of age and older. This would attract retirees from all over the country who would contribute to our state and local tax bases via property and sales tax."

"Regarding lost revenue, the size of state government can be reduced. Here's how: Combine the Departments of Revenue and Financial Institutions with Finance and Administration; Blend the Departments of Human Services and Children Services; locate the services provided by the Department of Mental Health within the Department of Health; Combine the Department of Economic Development and the Department of Tourism. Finally, I would hire a private company to perform the duties of the Department of Human Resources. Other states have saved millions by privatizing HR."

Wamp: "The Hall Income Tax is clearly burdensome on retirees, senior citizens, investors, and folks who are looking to move to and invest in Tennessee. We should move to eliminate the Hall Income Tax as soon as we see daylight in the state budget."

8) State business taxes account for about 24 cents on each state tax dollars in Tennessee. Is that a fair percentage, or would you seek to cut it as governor? What about cutting sales taxes on the state portion of food sales for consumers?

Haslam: "I want to make sure we're doing all we can to create an environment friendly to job creation in Tennessee."

"Cutting the state portion of sales tax on food would be difficult right now given the state's current budget situation and reliance on food sales for revenue. However, one way I will ease the burden on Tennessee families is by continuing the practice of holding annual "sales tax holidays" on important items including clothing, school supplies, and computers."

McWherter: "I am the only candidate in this race that supports a tax break for Tennessee small businesses that are creating new jobs. The vast majority of Tennessee workers are employed by small businesses, and these small businesses also account for the majority of new jobs being created in this state. We need to provide small businesses with the tools they need to create good paying jobs. The first tax I would seek to cut would be the grocery tax, because it directly impacts the family budget of every Tennessean."

Ramsey: "I will always seek ways to reduce taxes on business and consumers. In my first year as Lt. Governor, I passed a bill that cut sales taxes on groceries for Tennesseans. I do believe that in times of prosperity, when revenue streams are good and the state has a solid surplus in revenue, we need to return money to the taxpayers. It is not the state's money, it belongs to taxpayers. When presented with the opportunity to return some of that hard earned money back to the taxpayers, I will do it."

Wamp: "As we grow state revenues by right-sizing state government and aggressively working to recruit new business investment that grows our economy, we should look to make Tennessee as competitive as possible by reducing taxes on small businesses and working families as a way to create even more small business jobs in our state."

9) Why are you opposed to a state income tax?

Haslam: "I am 100 percent opposed to a state income tax, both for philosophical and very practical reasons. First of all, the American dream is built around working hard to move up the ladder and create a better future for your children. I fundamentally disagree with taxing hard work and creating disincentives to follow that dream. I also object to an income tax in Tennessee because not having one is a huge competitive advantage for our state and is an important job recruitment tool."

McWherter: "One reason I oppose a state income tax is because this is a major economic development incentive for companies looking to relocate. It makes us a very attractive state for business. I also believe that we should not be increasing the tax burden on our working families during this time of economic struggle."

Ramsey: "A state income tax provides a disincentive to work and it is a job killer. Plain and simple. It kills our competitive edge in luring business to our state and I won't stand for that. Tennessee's state economy is the envy of states which tax income. Ask anyone who has moved here to get away from an income tax and they will tell you the same thing."

Wamp: "I am strongly opposed to a state income tax because not having one is one of our greatest advantages in recruiting capital investment and growing more jobs in our state. As we met with and recruited Volkswagen to Chattanooga, it became apparent that not having a state income tax was one of the major reasons they chose Tennessee over other states. I will oppose or veto any attempt to enact a state income tax in Tennessee while I am Governor."

10) Are you willing to make a pledge not to raise any state taxes or fees?

Haslam: "Taxes are job killers. I am committed to getting our state through its current budget challenges by prioritizing, cutting, and restructuring state government."

McWherter: "On principle, I oppose any tax increases. Throughout the course of this campaign, I have repeatedly stated that I would not sign or make any pledges on any issue, instead taking the approach to be candid and forthright about my position on matters as they arise."

Ramsey: "Yes."

Wamp: "Yes. I do not intend to raise any state taxes. We must first reform and right-size state government and grow our state economy, not raise taxes."

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