Tennessee to establishincome tax?

As the state of Tennessee inches yet closer to establishing its first-ever income tax, the debate has turned nasty, with members of the legislature receiving death threats and Speaker Jimmy Naifeh characterizing anti-tax activists and radio talk-show hosts as "about the lowest class I can think of."

Last Tuesday, the House Finance Committee, on a voice vote challenged by some onlookers, approved Democrat Naifeh's proposed 4.5 percent flat-rate income tax. Thursday, Republican Gov. Don Sundquist endorsed Naifeh's plan and urged lawmakers to pass the measure. By the end of the week, Naifeh acknowledged receiving death threats on his office phone and other House members reported similar events. These events sparked Naifeh's vehement comments in a Memphis Commercial-Appeal article.

"They have no morals, and we just have to deal with people like that," Naifeh told a reporter.

Radio talk-show host Phil Valentine, one of those Naifeh singled out, told WND, "Having Speaker Naifeh refer to my listeners and me as 'the lowest forms of life' is laughable. This coming from a guy who takes state airplanes on golf junkets, lies to the people about budget cuts and whose wife is one of the most powerful lobbyists in Nashville, a direct conflict of interest. The Center for Public Integrity recently cited the legislature he leads as one of the most ethically-challenged bodies in the country.

"He said I was inciting a riot," Valentine continued. "My show may be 'insightful' but it's surely not 'inciting.' He's the one who continually incites the people of Tennessee with his attempt to pass an unconstitutional income tax. I think he owes every one of my listeners an apology."

Tennessee Bureau of Investigation agents have questioned the man they say is responsible for the telephone death threat to Naifeh, but authorities have not reached a decision on whether to prosecute the caller.

A full House vote could come next week, and anti-tax activists are preparing to launch their now-annual protests. Currently, Tennessee is one of only nine states across the nation that does not have some form of state tax on personal income.

Naifeh's proposal would abandon the tax on interest and dividend income, and scrap state and local sales taxes on food, clothing and non-prescription drugs. However, as a stop-gap measure, Naifeh's plan would increase the state sales tax by .5 percent for a period of six months to cover shortages until the other provisions are implemented. Although Naifeh has, in the past, sought passage by the state Senate before bringing the measure to a House vote, this time, the long-time legislative leader seems intent on putting the burden on the House.

"I'm very hopeful it will [pass]. It will be very close. I don't know if it will be next week or another week. If it passes, it will be by a very slight margin, and I hope it passes because we have so much at stake," Naifeh told WTVF-TV in Nashville.

The legislature's present alternative to the state income tax is a plan, introduced last month, called "Downsizing of Government Services" or DOGS for short. The proposal, sponsored by Sen. Jim Kyle, would cut about $775 million from current spending levels, including some $400 million from K-12 education. The Hillary Clinton-inspired TennCare program would revert to Medicaid, removing an estimated 500,000 from the rolls and removing several hundred million dollars in state and federal funds from the state's health-care system. It would eliminate two state departments: Tourism, and Economic and Community Development. It would cut $71 million from higher education. Legislative leaders privately say that perhaps as many as 12 or 13 departments could ultimately face the ax, and the reversion of the state's health-care plan to Medicaid could spell the end for several small community hospitals dependent upon TennCare payments to keep their doors open.

The DOGS budget is seen by activists as simply a scare tactic, but state legislators say that the belt is as tight as it can be and still provide services, and that unless new revenue is found, severely cutting services is the only option.

Legislators say privately, however, that they sincerely doubt that the DOGS budget would actually receive legislative approval.

"What we may end up with," one representative told WND, "is a court order to balance the budget, which will force us to implement some kind of tax increase."

Anti-tax activists deny that the state faces a budget crisis, insisting that state government must quit rampant spending. Tennessee Libertarian Party head Ray Ledford told WorldNetDaily, "It is incredible to me and the members of the LPTN that our very own legislators have doubled state spending in only 10 years. It took 196 years for Tennessee's budget to reach 10 billion dollars, a time spanning from 1796 to 1992. However, in only 10 years, Sundquist and the General Assembly have doubled that. What is all the more outrageous about this is that the average Tennessean's paycheck did not double during that time."

Legislators counter that the anti-tax activists don't have the full picture.

"They keep pointing to the number of unqualified TennCare recipients," Democratic caucus chair Randy Rinks told WND, "but they are ignoring the fact that, until recently, we've been under a court order not to remove anybody from TennCare rolls regardless of their qualifications." A recent state audit revealed several thousand unqualified recipients and, according to Rinks and House Minority Leader Steve McDaniel, the process to remove those people from TennCare has begun.

McDaniel also points out that the picture is more complicated than just looking at individual programs.

"A great deal of that money [that activists suggest cutting] is already encumbered under contractual obligations," he said. McDaniel lays the blame for the budget situation on exaggerated estimates of revenues from previous general assemblies. "They grossly overestimated our tax revenues and budgeted accordingly. That's why we are where we are."

Republican House District 83 candidate Chuck Bates agrees, in a fashion. "The real issue stems from over-spending. We have got to remember that the government that gives us everything we want must take everything we have to pay for it," he said.

Rinks calls for massive reform of the state's tax codes.

"We're operating under 60-year-old tax codes, and that was fine in a 1940s market. Fifty-seven percent of Tennessee's budget is dependent on sales tax," Rinks told WND. "Other states average about 30 percent or 35 percent. Plus, nearly all the states that border Tennessee have lower sales tax rates than we do."

One strategy that's receiving increasing support is Republican Sen. David Fowler's plan to put the income tax issue before the people in the form of a constitutional referendum for the November ballot. Although the leading contenders for the major parties' nominations for governor, Republican U.S. Rep. Van Hilleary and former Democratic Nashville Mayor Phil Bredesen, have sworn to vigorously oppose any income-tax measure, Hilleary's chief competitor for the Republican nomination, former House Minority Leader Jim Henry, has backed the call for a constitutional convention.

"Let the people decide," Henry told WND.

Legislative leaders anticipate a vote on the income tax perhaps as early as this week, and activists are gearing up to take to the streets again.

Previous stories:

Tax issue heats up again in Tennessee

Press gagged at Tennessee budget meeting

Tennessee governor to twist arms on taxes?

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