state taxes

TN September tax collections $58.8M over estimates

News release from Department of Finance and Administration

NASHVILLE, Tenn. – Tennessee’s revenues exceeded budgeted estimates for the second month of the state’s fiscal year.  Finance and Administration Commissioner Larry Martin today reported that overall September revenues were $1.4 billion, which is $48.3 million more than September of last year and $58.8 million more than the budgeted estimate. The growth rate for September was 3.68%.

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‘Bah, humbug!’ on sales tax holidays (from the Tax Foundation — and, kinda, UT’s Bill Fox in an update)

(Note: If you’ve looked at TV news, listened to the radio or read any newspaper in Tennessee the past few days or so, you will have seen reports on the “tax holiday” — no sales tax on designated purchases — this weekend. The statewide USA Today Network – Tennessee version is HERE. On the other hand, there’s this.)

 

News release from The Tax Foundation

Washington, DC (July 25, 2017) – Sales tax holidays represent poor tax policy, costing states revenue while providing little benefit, according to a new Tax Foundation report.

More policymakers are recognizing this less-than-desirable tradeoff; Tennessee is one of only 16 states to use sales tax holidays for 2017, down from a peak of 19 states in 2010. Tennessee will offer a back-to-school sales tax holiday July 28-30.

Key Findings:
  • Sales tax holidays create additional tax compliance costs, but larger businesses tend to lobby for the holidays as a form of free advertising.
  • Most sales tax holidays involve politicians picking products and industries to favor with exemptions, arbitrarily discriminating among products and across time, and distorting consumer decisions.
  • While sales taxes are somewhat regressive, this does not make sales tax holidays an effective tool for providing relief to low-income individuals. In order to give a small amount of tax savings to those with lower incomes, holidays give a large amount of savings to higher-income groups as well.
  • Political gimmicks like sales tax holidays distract policymakers and taxpayers from genuine, permanent tax relief. If a state must offer a “holiday” from its tax system, it is an implicit recognition that the state’s tax system is uncompetitive. If policymakers want to save money for consumers, then they should cut the sales tax rate year-round.
“Sales tax holidays have enjoyed political success, but recently, policymakers are reevaluating them,” the report says. “Rather than providing a valuable tax cut or a boost to the economy, sales tax holidays impose serious costs on consumers and businesses without providing offsetting benefits.”
The full report is HERE.

UPDATE: From a USA Today story, citing the posted news release:

Some critics contend that consumers might save even more without the holidays, as retailers would mount sales of their own timed to events such as back-to-school.

Bill Fox, director of the Boyd Center for Business and Economic Research at the University of Tennessee, said he took advantage of Tennessee’s recent holiday to buy several pairs of running shoes. “That 9 ¼ percent I saved is minuscule in terms of ‘savings,’ ” he said. “The stores would be giving a much better discount if they had a sale. Back-to-school sales would have been like 25 percent off, not 9 percent, and people would have saved more.

June TN tax collections: $112M over budget estimates

News release from Department of Finance and Administration

NASHVILLE,  Tenn. – Total tax revenues for June were above budgeted expectations. Finance and Administration Commissioner Larry Martin announced today that overall Tennessee tax revenues in June, led by strong growth in franchise and excise (F&E) taxes, were $1.4 billion, which is $112.1 million more than the state budgeted.

“While we are encouraged by the positive revenue numbers, we need to be mindful of two important points,” Martin said. “First, the Funding Board in November 2016 revised upward for the fiscal year 2017 budget the anticipated positive variance for overall Tennessee taxes. As a result, $663.3 million of the fiscal year 2017 unaudited year to date positive variance of $731.3 million general fund revenue is already included in the fiscal year 2018 budget. Secondly, F&E tax payments by businesses are estimates of their tax liability and are subject to change.”

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Speedy governor signs IMPROVE tax package into law

Gov. Bill Haslam has signed into law the “IMPROVE Act,” including increases in gasoline and diesel fuel taxes, on Wednesday — just two days after it gained final legislative approval, according to the governor’s press secretary, Jennifer Donnals.

That’s rapid processing, both for the legislative staff and the governor’s office. Often it takes a week or so for a bill to go through the “engrossing” process and other steps in formal requirements for presentation of a bill in final version to the governor. And then the governor has 10 days (counting Saturdays, but not Sundays), once a bill reaches his desk, to sign it, veto it or let it become law without his signature.

Presumably, the governor and legislative leaders simply wanted the process complete as they  move to wrap up work on the state budget in the coming week or two. Action on the budget has been delayed this year – last year, the legislative session ended on April 20th – because several budget provisions hinged on whether or not the IMPROVE Act was approved or not.

In an email to media, Donnals says a more ballyhooed “ceremonial signing” will be scheduled at a later date. That will give legislative leaders and other dignitaries a chance to watch (and perhaps make speeches) as the governor goes through the motions of signing again a bill that has already become law.

Study finds vehicle sales tax more volatile than fuel tax

The Sycamore Institute, founded in 2015 by former state Sen. Jim Bryson of Franklin (also the Republican nominee for governor in 2006) and billing itself as a “nonpartisan policy research center for Tennessee,” has issued a 20-year comparison of state fuel tax revenue and sales tax revenue from vehicle sales taxes.

The accompanying chart shows state sales taxes on vehicles dipped by nearly 20 percent during the 2008 recession. Fuel taxes dipped by about 5 percent during that time.

gas-tax-revenue-and-car-sales-in-tennessee

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Haslam gas tax plan clears House Finance; no vote on Harwell alternative

Gov. Bill Haslam gas tax bill won approval of the House Finance Committee in a voice vote Tuesday after an alternative proposal promoted by House Speaker Beth Harwell was discussed, then shelved without a vote.

The Harwell alternative came in the form of an amendment sponsored by Rep. David Hawk, R-Greeneville, that would have diverted sales tax revenue from vehicle sales to the highway fund rather than the state’s general fund. Haslam’s bill (HB534) raises the gas tax by six cents per gallon and the diesel fuel tax by 10 cents per gallon over a three-year period. It also includes cuts to other taxes.

Further from The Tennessean:

The House finance committee’s approval of Haslam’s bill assures the measure could receive a vote on the House floor, barring any last minute legislative high jinks. (It’s already cleared for a Senate floor vote.)

… Rep. Gerald McCormick moved to reject Hawk’s proposal, which led the Greeneville Republican to withdraw his amendment.

McCormick said because Hawk’s amendment would have completely rewritten the bill, the committee should be leery of taking such action.

“I’m really afraid that we could make some serious mistakes doing that,” McCormick said.

Despite pulling back his amendment, Hawk vowed to continue to fight over the measure on the House floor.

“I will state that this issue is far from being done. We will have a conversation on the floor about how we need to better fund transportation and what is the most responsible way to do that as we serve our constituents,” Hawk said. “That’s a promise. We will have a debate on the floor and we will bring an amendment to the floor.”

24 big firms collectively save $57M per year under Haslam corporate tax break plans

Gov. Bill Haslam’s administration has calculated that one provision in the governor’s tax package would collectively give $113.8 million annually ib tax breaks to 518 Tennessee companies with just 24 big firms get more than half the benefits in corporate tax cuts, reports the Times-Free Press.

Haslam calls his tax package the IMPROVE Act; other supporters have begun calling it The Tax Cut Act of 2017. It increases gas and diesel fuel taxes while lowering the sales tax on groceries and some other levies – most notably a break for manufacturers in payments of franchise and excise taxes. The newspaper says it got a copy of the administration analysis, which has not been released publicly.

Twenty-four large manufacturers would see annual reductions of $1 million or more in their state franchise and excise taxes, according to the analysis obtained by the Times Free Press and verified by two legislative sources. Those tax breaks would account for $57.44 million, or 50.7 percent, of the total $113.3 million.

Another 145 companies would see tax cuts between $100,000 and $1 million, for a collective reduction of $47.95 million. All told, 93 percent of the proposed change, or $105.4 million, would go to companies that would save $100,000 or more. Some 349 smaller companies would share a $7.89 million reduction., according to the analysis.

Haslam said the manufacturers’ tax cut is aimed at encouraging existing companies to boost investment and new ones to locate to Tennessee by letting them choose the formula for calculating their franchise and excise tax burden.

…The analysis does not identify specific companies impacted. State law prohibits public disclosure of most taxpayer information.

TN out-of-state sales tax collection rule draws lawsuit

Attorneys for American Catalog Mailers and NetChoice, an association of e-commerce retailers, filed a lawsuit Thursday in Davidson County Chancery Court challenging Tennessee’s effort to require retailers based outside the state to collect sales taxes from their Tennessee customers, reports the Times-Free Press.

The complaint seeks a declaratory judgment against the Tennessee Department of Revenue and Revenue Commissioner David Gerregano over the department’s Rule 129, which was adopted last year.

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Soccer, veterans, taxes get tangled in House GOP floor fights

Legislation dealing with a proposed soccer stadium in Nashville and a property tax break for disabled veterans got tangled up with Gov. Bill Haslam’s fuel tax package in contentious quarreling among  House Republicans Thursday.

The results were inconclusive: The soccer bill passed, as expected, and House Majority Leader Glen Casada gave up on his veterans tax maneuver, which began with him declaring:

“Ladies and gentlemen, it’s time for the House to lead.”

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House Transportation Committee votes for revised Haslam tax bill

The House Transportation Committee today approved, 11-7, the same revised version of Gov. Bill Haslam’s tax package — including higher taxes on fuel and lower taxes on food – that was approved earlier in the Senate Transportation Committee. The panel has been viewed as the biggest obstacle to ultimate approval of the governor’s proposal, though several hurdles remain.

The vote came after about 90 minutes of debate and defeat or withdrawal of multiple amendments. A couple of amendments were adopted. Most notably, perhaps, one would reverse a current law that says that any cut in federal gas taxes would automatically trigger a corresponding increase in state gas taxes. The amendment says any increase in federal taxes would trigger a corresponding decrease in state fuel levies.

The most debated amendment was on a proposal by Rep. Dale Carr, R-Sevierville, that would have diverted money from sales taxes collected from the sale of vehicles to the highway fund without any fuel tax increase. It failed on an 8-10 vote.

The basic bill (HB534), as now approved by both the House and Senate Transportation Committees, raises the gas tax by six cents per gallon and the diesel fuel tax by 10 cents per gallon – both increases phased in over a three-year period. The governor’s original proposal was seven cents per gallon on gas and 12 cents on diesel, both taking full effect July 1.

The revised version also cut the state sales tax on groceries from 5 percent to 4 percent. Originally, Haslam proposed a reduction to just 4.5 percent. Administration officials say the grocery tax, for most average Tennesseans, would now more than offset the increased taxes they will pay for fuel.

Most other provisions of the governor’s original package remain in place — including a corporate tax break designed to benefit for manufacturers.

The revised bill also won approval today, as expected, in the Senate State and Local Government Committee. In the Senate, it now goes to the Finance Committee. In the House, it now goes to the Local Government Committee.

The committees overseeing local government legislation are involved because the bill also includes provisions allowing city and county governments to hold referendums on raising taxes for transportation spending.

Note: The House committee roll call vote is HERE.

ABOUT THIS BLOG

Former Knoxville News Sentinel capitol bureau chief Tom Humphrey writes about Tennessee politics, government, and legislative news.

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