February 20, 2007

Grand Delusions

Gov. Phil Bredesen so badly doesn't want to cut the sales tax on groceries that he's now claiming the Republican proposal is a ploy to get a state income tax. That's absurd of course - it is the party that Bredesen leads which supports a state income tax and very nearly voted one into existence several years ago. Republicans, mostly, stood against the income tax, and since the Income Tax Wars of the late 1990s and early 2000s, the Republican House and Senate caucuses have become more anti-income tax with the retirement or defeat of pro-income tax legislators and the election of more anti-income tax legislators.

The claim that Tennessee would face a fiscal crisis if it didn't tax food is also absurd - the food tax generates a minor part of state revenues - it generated less than $500 million last year for a budget above $25 billion. (The governor's proposed budget for fiscal year 2007-08 is $27.5 billion.)

The Legislature's Fiscal Review Committee has estimated that ending the sales tax on food would reduce revenue collections by $3.6 billion over the next 12 years - $300 million per year. I think that's high given the Republican proposal is to slowly phase out the 6-cent tax by half a cent per year. Still, $3.2 billion is an interesting figure as, if the legislature and governors of both parties had merely restrained the annual growth of the state budget to the level set in the state constitution's "Copeland Cap," rather than routinely busting the cap, the state today would have an annual revenue surplus above $3.4 billion. In other words, if the state would merely live within the constitutional cap on spending going forward, the sales tax on food would rapidly become wholly unnecessary.

Besides, cutting the sales tax on food may actually generate other revenue for the state - I'm betting the Legislature's Fiscal Review Committee didn't include that in its calculations.

Meanwhile, there is one bigtime elected official in Tennessee who is saying that he believes Tennessee eventually will have to have a state income tax. That elected official is Gov. Phil Bredesen. Check out the last 10 seconds of this video of his meeting recently with the Chattanooga Times-Free Press editorial board...

And that's all I'm going to say about that.

Blogosphere reaction: Adam Groves (with choice words from state Sen. Mae Beavers).

More Media Links: Knoxville News Sentinel story here