GOP Gives Its Take On State Revenue/Tax Swap

House Republican leaders called for a dialogue with the Bredesen administration over how to spend what they said is “almost one billion dollars” in available new revenue. Nashville Republican Beth Harwell says one option is trading new cigarette tax revenue for a break on the sales tax on food. She says it’s doable because the state is in the middle of good times.

While Republican leaders are vague on how to implement sales tax relief, Harwell says they want to do it safely, taking into account that there may be a drop in smoking if cigarette taxes increase.

“So my thought was to err on the side of caution, bring the money in, in a separate fund that’s set aside for tax relief purposes. So that we don’t spend the money until we know how much money we have in this fund.”

But the amount of money Republican touted was questioned by Finance Commissioner Dave Goetz He says the GOP figure of nine hundred and fifty million dollars in new revenue, includes a quarter of a billion dollars that came from previous years’ reserves.

Goetz says the state is far from being fully funded, and pointed to highway construction, which he said is suffering this year from a cutback in federal funds and the rising costs of gasoline.

“I think if what the Republicans were trying to do was to say, ‘Look, we want to make sure tax relief is not ignored or lost sight of in this debate, I think that’s fine, I understand that. I think there’s significant sentiment for some kind of tax relief on both sides of the aisle and both ends of the hall.”

All those sides, Republicans and Democrats, House and Senate, are waiting for state economists’ forecasts to be given to the State Funding Board Monday.

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Representative Harwell is proposing a 20 cent per pack increase in the cigarette tax – 20 cents less than Governor Bredesen has proposed. She says the best time for a food tax swap is now, given state revenues…

“Well I think now is the correct time because as we receive the revenue figures for our state we realize that financially we are doing very well. We are bringing in more even than we expected. We have fully funded all our government programs, including fully funding the BEP program, and have extra money. So it seems like now is the right time to give tax relief to Tennesseans, return some of the money that is theirs.”

Previously Senate Speaker Ron Ramsey had suggested that one way to return what he called “over-collected” revenues to the taxpayer was by taking the sales tax off food for a month, or perhaps for November and December. House Republican Leader Jason Mumpower said today that was one possibility.

“A lot of our budget surplus is in the form of non-recurring revenue this year. So I think it would be very responsible to create something like a food tax holiday, at the holidays. Maybe take all of the sales tax on food off from November 15th to December 27th, when people are out doing a lot of shopping, when people actually need to see more money in their wallets, at Christmas, at Thanksgiving, when it can really make a difference to their families.”

Rep. Beth Harwell’s bill, HB 1668/SB 1816 Bunch, has been treated as a caption bill in the House and is the mythical “general subcommittee,” a parking place for bills, in the Senate Tax Subcommittee. Originally Mumpower sponsored the bill in the House. Senator DeWayne Bunch is the Senate sponsor.

As filed the bill simply reduces to 60 days the time the revenue department has to return certain refunds to dealers. The changes in the taxes would be in an amendment, a classic case of a late-session amendment of a “caption bill,” which exists only to be amended.