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Legislature cuts sales tax, approves budget
By Christine Buttorff, NashvilleCityPaper.com
June 12, 2007
The day started early and finished late Monday as the Legislature worked out the final kinks in approving a $28 billion budget that included a lopping a half-cent of sales tax off of food.
Despite a tentative compromise reached last week in the House and Senate finance committees, a handful of lawmakers campaigned outside the Capital on Monday morning pushing for a deeper reduction of the state’s 6 percent sales tax on food. The House Republicans spent $1,000 on $5 Kroger gift cards to hand out to anyone who brought them a grocery receipt.
Bickering continued throughout the day with Majority Leader Glen Odom, (D-Nashville) calling sales tax cuts “irresponsible” and Republicans looking for alternatives.
Rep. Susan Lynn (R-Mt. Juliet) said House Republicans wanted a three-cent reduction in sales tax saying that “when the sales tax was raised five years ago, it was raised too much because we’ve had great surpluses year after year after year.”
Part of the debate five years ago, when the sales tax was raised, centered on whether to enact a state income tax. At the time, a vote for a sales tax bill could have been construed as being for an alternative source of revenue. And the specter of the income tax lingered over the Senate as they voted on several bills needed to fund the food sales tax relief and to exceed the state’s spending cap.
Sen. Douglas Henry (D-Nashville) did not vote for the food sales tax proposal, which will cost the state $40.7 million dollars in the first full year of implementation. He tried to amend the bill to eliminate the sales tax proposal because he said it permanently erodes the tax base.
“Unpleasant as it is, the sales tax on food is the most stable tax on the books,” Henry said. “When you start whittling away on the sales tax, you’re walking down the road to an income tax.”
For Senate Republicans, many felt the tax relief package did not go far enough.
“The net effect is sort of paltry really,” said Republican Leader Mark Norris (R-Collierville).
Worth $35.37 million in the first year, it includes the food sales tax reduction, as well as the sales tax holiday for Easter Weekend, senior citizens property tax relief and a veterans’ tax break.
Both House and Senate also voted to increase spending beyond the so-called ‘Copeland Cap,’ by $46 million this year and $57.3 million next fiscal year. The cap, named for former Rep. David Copeland, was enacted in the late 1970s to prevent the state from spending more in a year than personal income increases. The cap is being broken to put $250 million into the rainy day fund over a two-year period, bringing the total to $750 million.
The Bredesen administration argues that saving money is not equal to spending money over the cap.
Some legislators did not vote for the budget because of the ‘Copeland Cap’ issue, including Republican Jack Johnson (R-Brentwood).
“I understand it’s kind of an unusual year with money going into the Rainy Day fund, but bottom line, we’re still increasing the growth of government and the rate of government spending at a pretty phenomenal rate and I was uncomfortable with that.”
Slight differences between the Senate and House versions of the budgets will be worked out and Legislature plans to adjourn today.
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