April 27, 2004

Bredesen/Naifeh Stealth Tax Increase Update

In the Tennessee legislature, House Bill 3529, the stealth tax increase on Tennessee businesses backed by Gov. Phil Bredesen, House Speaker Jimmy Naifeh and House Majority Leader Kim McMillan, all Democrats who promised to balance this year's budget without increased taxes, is on the agenda for today's meeting of the House Finance Committee, and the Senate version of the bill, SB3427, is scheduled to be heard in the Senate Finance Committee today,

/// UPDATE: The House Finance Committee adopted an amendment to the legislation, and sent it on the the Calendar & Rules committee with a recommendation for passage. Details on the amendment to come. My legislative correspondent says the Senate version also was amended. No details yet. \\\

This tax increase is fiscally irresponsible, and comes at a time when the state is piling up a large revenue surplus.

The Bredesen administration and Democratic legislative leaders are pushing this tax increase, though they promised to balance this year's budget without additional taxes.

The National Federation of Independent Business, after surveying its Tennessee members, has come out in opposition to this tax increase:

When we surveyed our members last week, 90 percent of you said that this bill was a bad idea. We have communicated your position on this bill to its sponsors, the administration and the General Assembly. We are telling them that our members oppose the bill because:

It denies small businesses the full benefit of the accelerated depreciation in the President's tax package, even as small businesses are leading the nation into economic recovery.

By permanently decoupling, it denies small businesses part of the benefits of any future accelerated depreciation measures.

It creates administrative hassles by forcing small businesses to keep two sets of books when depreciating their equipment, one for state taxes and one for federal taxes (accountants love this bill!).

Word has it the Bredesen administration, which is pushing hard for passage of the tax increase, is claiming it is "revenue neutral," even though the fiscal note that accompanies the bill clearly says it will increase state tax revenues collected from Tennessee businesses by $75 million.

How a $75 million tax increase is "revenue neutral" escapes me. Perhaps the Bredesen administration would care to explain - if they respond, I'll provide their explanation here at HobbsOnline.

If you are interested in helping defeat this tax increase on Tennessee businesses, you should contact the members of the House Finance Committee and the Senate Finance Committee to express your opposition to this fiscally irresponsible tax increase and unnecessary tax increase. (Those links take you to the committee pages - where clicking each member's name brings up contact info including phone, fax, and email.)

You can read the text of the email I sent to committee members here.