May 20, 2005

Why Taxpayers Won't Get Surplus Rebate

Today's Tennessean front page contains a story I never thought I'd see in that paper - much less atop page one: Give taxpayers back $272M, some say. The story, by Trent Seibert, looks at how Gov. Phil Bredesen and many legislators are rushing to spend $272 million in unexpected revenue - more than half of it from excess taxes collected this year - and why taxpayers won't be getting any of it back.

More tax collections than expected — an extra $272 million — are pouring into Tennessee's coffers. How much of a refund can you expect back?

Not a dime. Gov. Phil Bredesen and legislative leaders already have plans for the cash.

"Unfortunately, they're treating this like it's a pinata; whoever comes along can take a whack at it and get their money," said Ben Cunningham of Tennessee Tax Revolt, a group that lobbies for less government spending. "It burns a hole in their pocket. They spend it right up."

Bredesen on Wednesday rolled out his plan to spend the money... But some complain that taxpayers didn't have a chance to weigh in on what should be done with the money.

"Wide-eyed lawmakers who see the $272 million surplus as an opportunity to please special-interest groups by throwing funding their way need to wipe the drool from their chin and get a reality check," said Drew Johnson, president of the free-market think-tank Tennessee Center for Policy Research.

Johnson talked yesterday about ideas for the excess sales taxes, including a weekend long sales tax holiday to let Tennesseans purchase goods during the back-to-school shopping season without the burden of a state sales tax.

Those who remember the 1999-2002 income tax war will recall that supporters of the income tax often claimed that we needed "tax reform" because the sales tax was too high, and ought to be taken off of food.

The fact that those same people are not now urging the surplus be used to remove the sales tax from groceries is a good indicator of their sincerity on that issue.

Seibert's story also notes that "Cunningham, Johnson and others are still pushing for a 'taxpayer bill of rights'."

What it would do, in essence, is return excess tax money to taxpayers by writing into the state constitution a cap on government spending based on the previous year's budget, with increases for inflation and population growth. When the state has a surplus, taxpayers get it back in the form of individual checks or a yearlong reduction in the state sales tax the next year.

That could replace a spending cap already on the state books that critics say is woefully ineffective. A simple majority vote by legislators can remove the cap, and lawmakers have done that in 12 of the past 20 years.

But proponents plan on trying to sell the idea to people across the state this summer.

"Next year is the year we really, really push for this," said state Rep. Glen Casada, R-Franklin, a champion of the idea. "The people of Tennessee need to stand up and say, 'Instead of spending it, send it back to us.'"

The festivities begin at noon, and Bryson and I will wipe the floor with our opponents' claims starting at 12:30 p.m. ;-)

I'm currently updating my "white paper" on TABOR, The Case for a Real Tennessee Taxpayers Bill of Rights, in advance of that luncheon panel and will be posting the newly updated version here on Friday or Saturday. The paper compares the state budgets, taxes and economic performance of Colorado and Tennessee in the years since Colorado adopted its benchmark Taxpayers Bill of Rights in 1993.

While you wait breathlessly for the updated version, you might enjoy reading two columns I wrote on the topic back in August of 2001 for the Nashville City Paper:

Finding common ground on taxes - August 23, 2001
Tennessee should consider taxpayer rights bill - August 30, 2001
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For more scrutiny of the Bredesen record, see Bredesen Watch.