TN revenue bonanza leads legislators to eye more tax cuts

Based on State Funding Board projections, the Tennessee General Assembly will have close to $2 billion in extra money to distribute during the upcoming legislative session above current year spending, prompting legislator talk of tax cuts as Gov. Bill Haslam seeks a tax increase.

Further from the News Sentinel:

The Funding Board projections, adopted unanimously on Nov. 29, foresee up to $878 million in new, recurring money available for spending on an annual basis starting in the 2016-17 state fiscal year that begins June 30. Economists involved in analyzing the data suggest the figure might be conservative – as the estimates have been in recent past years.

That is an unprecedented figure for new recurring money in that state budget excepting years following a major tax increase – most notably a 2002 hike in the state sales tax and other levies that, combined, provided about $1 billion in new funding.

In addition to the bonanza in recurring funds for next year, the state is expected to have about $1 billion in surplus tax collection funds to spend on a one-time basis – or “non-recurring” money in budgeting lingo.

…Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, who is expected to be elected Senate speaker and lieutenant governor on the session’s opening day, and House Finance Committee Charles Sargent, R-Franklin, both said in separate interviews that they would like to seek a substantial chunk of the new recurring money go toward cutting taxes.

The veteran lawmakers both also said their personal priority in tax-cutting would be a reduction in the state’s excise tax, a 6.5 percent levy on corporate income. According to the Tax Foundation, Tennessee’s tax on corporate income is currently the 18th highest in the nation. Among Tennessee’s eight neighboring states, Arkansas and Alabama are also at 6.5 percent while the rest are lower – the lowest being North Carolina at 4 percent.

“Tax relief ought to be an important item on our agenda,” said McNally, the legislature’s senior member, adding that reducing the business tax is “my No. 1 priority” for reductions.

He and Sargent both said the state’s relatively high corporate tax rate is sometimes an impediment to recruiting new businesses to locate in Tennessee because of the lower rates in competing states. But they said other tax cuts will be considered. Among them:

The state’s “professional privilege tax,” currently a $400 per year levy on persons holding state licenses to practice in 22 professions – examples including doctors, lawyers, investment advisors, accountants. Repeal bills were filed last session but failed to pass.

Reducing the state sales tax on groceries, currently at 5 percent, compared to the general state sales tax rate of 7 percent on most other goods. Legislation to eliminate or further reduce the food tax – it’s been incrementally lowered in past years – are filed annually, usually by Democrats declaring the levy disproportionately impacts lower-income Tennesseans while other tax cuts in recent years benefited mostly the wealthy.

…McNally and Sargent said they are open to increasing taxes on fuel to help the highway fund even while cutting other taxes, though acknowledging that raising taxes while state revenue is a record high levels may seem unreasonable in the general public perception.

“You have to understand those are two separate funds,” Sargent said, acknowledging that many people do not and that makes legislators uneasy. Still, “with enough people selling the idea,” he said there’s a prospect for both raising and cutting separate taxes.

Sargent noted that while the state general fund is flush with money, the highway fund – funded by law only money from fuel taxes that have not been increased since 1986 and are lower than in most states – has a $6 billion backlog of projects awaiting completion.

“It’s hard for people to distinguish that we have two pots of money and we don’t want to mix them,” said McNally, though he, too, said a majority of legislators may be sold on the proposition.

2 Responses to TN revenue bonanza leads legislators to eye more tax cuts

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    Jerry McDonough says:

    I would not be adverse to a gas tax increase so long as there is an accompanying ;aw that states unequicly the money raised MUST go to roads and bridges ONLY.

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    I agree that cutting priviledge Tax is very important, followed by excise tax. The gas tax may be raised but MUST be spent onley on infrastructure.

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