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Tennessee lawmakers see no progress on cigarette tax hike, grocery tax cut

Hank Hayes • Mar 10, 2007 at 9:36 AM

Neither Tennessee Democratic Gov. Phil Bredesen nor Republican lawmakers seem to be getting their way this year on two core initiatives - Bredesen's 40 cent cigarette tax hike to help fund education and a GOP move to either reduce or eliminate the sales tax on food.

The idea of a swap or compromise between the two measures also appears to be nonexistent.

One bill to exempt the state sales tax on food, sponsored by state Rep. Matthew Hill, R-Jonesborough, has been assigned to the so-called "black hole" subcommittee of the House Finance Committee controlled by Democrats. Two other Republican legislative measures to reduce the sales tax on food have been withdrawn and assigned to a study committee.

Bredesen, during a recent appearance at Kingsport's Holston Valley Medical Center to launch his CoverTN health care initiative, said he is still encouraging lawmakers to pass his proposed $27.4 billion budget with the cigarette tax increase.

"I put a budget on the table that makes sense and puts an awful lot of money into local school systems," Bredesen said. "I think they should pass the budget as it sits, and I'm certainly going to fight for that."

Bredesen also acknowledged that lawmakers really aren't engaged in the budget process yet.

"I'm a little disappointed, I have to be honest, to the extent to which the Republicans have been unable to get beyond giving each other high-fives for having gotten control of the Senate and kind of move on to doing some things and really governing," he said. "I certainly hope the Republican legacy for this session is not keeping money out of local school systems, and I am certainly going to make that point to them every time I possibly can."

Under Bredesen's budget proposal, the cigarette tax increase would generate an extra $200 million.

His administration has also put together a document showing that a yearly half-cent decrease in the sales tax on food would create more than a $500 million loss in state revenues through 2017.

"When you look at the kinds of expenses we simply have to do ... just the normal ongoing costs and not any new initiatives and put that against what is our normal revenue growth and start to take out $40 million to $50 million a year as this gradual removal of the sales tax on food comes out, it piles up into a big amount," Finance Commissioner Dave Goetz said. "We faced a deficit when we came into office (in 2003). It is not our intent to leave the next governor with another hole to dig out of."

But Northeast Tennessee lawmakers who stood behind Bredesen at the CoverTN launch event indicated the governor probably won't get a 40 cent cigarette tax hike.

"Right now, it doesn't look like it's going to happen," said state Rep. Mike Harrison, R-Rogersville.

State Rep. Nathan Vaughn, D-Kingsport, said some lawmakers favor a cigarette tax increase, but not 40 cents.

"The food tax swap is even more problematic," he said. "If we don't do something in terms of raising the cigarette tax, there's not going to be any resources there to do the food swap when you look at the fact that what's also being asked is to use some of those dollars for education."

State Rep. Dale Ford, R-Jonesborough, also didn't think lawmakers would pass a 40 cent cigarette tax increase.

"I think it will be something, maybe 20 to 30 cents per pack," Ford said.

State Rep. Kent Williams, R-Elizabethton, also didn't have much hope in a cigarette tax hike/food tax decrease swap.

"The consensus is the cigarette (tax hike revenue) is not a reliable source of income," said Williams. "It sounds good in theory, but we need something more stable. I'd love to see the tax taken off food, but we have to find a reliable source to do any kind of swap, I think. When you're spending millions of dollars and you get people to quit smoking and then rely on that income to run government it is not good policy."

Vaughn expressed concern that without more new money going into education, "there is going to be the move to remove dollars from some Northeast Tennessee cities from their school systems and direct those dollars to other parts of this state."

Bredesen said his plan to make changes in the state's Basic Education Program (BEP) - the funding vehicle for K-12 education - won't be isolated to just Knox and Hamilton counties. Officials from those two counties are "the most complaining" about the BEP, said Bredesen.

"There are issues here in Northeast Tennessee with the BEP, and I'm going to try to improve it," Bredesen promised. "I think a year in which you've got some new money to put into this system is actually a good year to work with those kinds of things."

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