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Sales taxes grow for first time in 2 years

Sales taxes grow for first time in 2 years

Posted: Thursday, May 13, 2010 9:04 pm
By: AP

By LUCAS JOHNSON II
Associated Press Writer
NASHVILLE (AP) — Tennessee lawmakers working to settle on a spending plan finally have some good news: The state’s monthly sales tax collections have grown for the first time in nearly two years.
Legislative leadership discussed the upcoming budget with Democratic Gov. Phil Bredesen at their weekly breakfast in Nashville on Wednesday morning. The talks came as lawmakers learned that general fund collections came in at $51 million above expectations in April, which reflect economic activity in the previous month.
Sales taxes, which ac-count for two out of every three tax dollars collected by the state, grew by 5.6 percent, compared with the first nine months of the budget year, when they decreased by 4.1 percent. The last time Tennessee saw a growth in sales taxes was in May 2008.
Corporate franchise and excise taxes came in almost $48 million above expectations in the month.
Still, the state’s general fund was still about $154 million below original projections for the budget year that ends June 30.
Senate Republicans have offered their alternative to revenue measures proposed by Bredesen that included a $2 increase in driver’s license fees, lifting a sales tax cap on big-ticket items and eliminating a tax exemption for the first $15 on cable bills.
The GOP plan would instead begin to phase out a 401(k) match program for state employees and eliminate a planned 3 percent bonus. It would also dismantle the Career Ladder program for teachers established by former Republican Gov. Lamar Alexander.
House Democratic Caucus Chairman Mike Turner of Nashville told reporters after the breakfast that House Democrats have concerns about the GOP plan — particularly eliminating the bonus — and would prefer to stick to a budget proposal they put together last year.
“We put … a three-year plan in place last year and we’re trying to stay the course,” Turner said.
Later, House Democratic leaders issued a statement that said they’ve approved a preliminary counter budget to the Republican proposal.
“We intend to fix as many of the Senate Republican cuts as we can because they hurt our teachers, farmers, state employees, and Tennessee families,” said House Finance Chairman Craig Fitzhugh, D-Ripley.
House Democrats have said they’re willing to dip into the state’s cash reserves if necessary to balance the state budget.
“Our rainy day fund is for a rainy day, and here in Tennessee it’s raining,” said Speaker Pro Tempore Lois DeBerry, D-Memphis.
House Speaker Kent Williams agreed.
“State employees … haven’t had anything in three years, and to remove the Career Ladder for teachers and 401(k) to reduce that, I just don’t feel we’re in a position right now where we have to make these reductions when we have $500 million in reserves,” said the Elizabethton Republican.
State Finance Commissioner Dave Goetz said earlier this week that about $330 million should remain in the state’s rainy day fund at the end of the next fiscal year, and another $170 million is expected in TennCare reserves. TennCare is the state’s expanded Medicaid program.
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Associated Press Writer Erik Schelzig contributed to this report.
Published in The Messenger 5.13.10

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