‘New Normal’ Not Good Enough - We Need Revenue with Justice!

Gov. Haslam said Monday in his State of the State address that Tennesseans face a $1.4 billion revenue shortfall, noting that this “reality will frame this budget” and that this is the “new normal.”

The revenue shortfall is not an inevitability reality – it is a choice. Tennessee’s elected officials have revenue options that could give two-thirds of Tennesseans a tax cut, support local businesses and the state’s economic growth, AND raise more than $1.4 billion in new revenue. They choose to ignore those options – that is the reality.

The status quo for Tennessee – revenue generated overwhelmingly by one source, the highest sales tax in the nation – has left us underfunded and kept us ranked behind the rest of the nation and our neighboring states in key quality of life issues. By declaring this to be the “new normal,” Gov. Haslam is telling Tennessee he is willing to settle for last, or maybe next to last, place.

“Gov. Haslam proposes cutting up to 2.5% from every state department, saying the government has to spend less,” said John Stewart, former TFT board chair. “At the same time, a portion of public money is being directed away from needs of Tennessee taxpayers and redirected toward large corporations.”

The proposed budget includes a $92 million gift to Electrolux, a company that recently closed a distribution center in Chattanooga to move it to Georgia. Electrolux has proposed a new center in Memphis, claiming that the almost $100 million gift in state funds was promised by the Bredesen administration. The leading Internet retailer, Amazon, has also promised to build two distribution centers in Tennessee, but only if it receives a special exemption from having to collect the Tennessee state sales tax. The Dept. of Revenue is considering a rule-change to cave in to this demand, throwing away at least $35 million in annual revenue for Tennessee, and handing Amazon a significant competitive price advantage over all other Tennessee retailers.

It’s one thing to be “business friendly”; it’s quite another to be promiscuous with taxpayer dollars! Gov. Haslam’s proposed budget takes money from Tennessee’s colleges, TennCare, and pre-K and gives it to corporations that aren’t even based in Tennessee and refuse to follow Tennessee’s laws,” said Phil Schoggen, Nashville TFT member “This is outrageous – Tennessee needs jobs, but giving millions of dollars to mega-corporations who don’t need the subsidies is not the way to do it.”

Gov. Haslam’s address emphasized the importance of job creation and education. Local businesses create up to 80% of our private-sector jobs, but they are hurt by the state’s high sales tax, competition from online retailers, and economic development deals that funnel money to large, out-of-state corporations. The high sales tax sends Tennessee shoppers and Tennessee jobs across the borders into neighboring states with lower sales tax rates.

Higher education is only attainable when it is affordable – college tuition has increased 74% in the last 10 years because of state budget cuts. Furthermore, the HOPE Scholarships, funded by a regressive and "voluntary" tax, goes disproportionately to the well-off who wind up paying little in tuition. "In the meantime, other students must take on personal debt to obtain a college degree. that debt isn’t going to help the state economy in the future,” said Anne Mayhew, a retired professor from Knoxville . “The state needs to increase funding to our pre-K programs, colleges and universities if we’re truly going to have a competitive workforce and economic growth in the future.”

In balancing the state budget, our elected leaders have two options: budget cuts or revenue generation. Lately, they have ignored this second option.

“Gov. Haslam claimed in his address that ‘the people of Tennessee want us to fix the budget shortfall and not raise their taxes,’” said Jennifer Tlumak, TFT board member “That could be accomplished by asking corporations to pay their fair share and by asking higher income residents to pay at a level comparable to what lower income Tennesseans are paying in taxes, thereby avoiding program cuts that hurt all our communities. We need revenue and we need justice.”

Tennesseans for Fair Taxation is a statewide non-profit organization that works at the intersection of revenue and justice to create a tax system that invests in Tennessee, its people, and its communities.

TFT’s proposals would raise at least $1.4 billion with the following measures:

1. Close corporate tax loopholes that allow multi-state corporations to shelter income earned in, and owed to, Tennessee ($110 million).
2. Require online and out-of-state retailers to follow the law our local businesses must follow and collect sales tax on items sold in Tennessee ($100-$365 million).
3. Eliminate the single-article sales tax cap on big-ticket items, so those making expensive purchases pay the same tax rate paid by those making inexpensive purchases ($85 million).
4. Eliminate the tax on groceries, reduce the general sales tax and implement a broad based personal income tax with generous exemptions (2/3 of Tennesseans would get a TAX CUT and pay no income tax and an additional $1 billion in revenue would be raised).