Thursday, May 03, 2012
- by Rep. Eric Watson
On Monday night, the House of Representatives passed the state's annual appropriations bill with a 64-28-1 vote, the culmination of months of tireless work crafting a fiscally responsible budget. The $31.5 billion budget is a 2 percent reduction from last year, puts $50 million in the state's Rainy Day Fund, and included three significant tax cuts,we made a priority this year--a phase out of the death tax, elimination of the gift tax, and a reduction in the food tax. The Tennessee General Assembly is charged, by the Tennessee Constitution, to balance the budget every year.
The budget saves an additional $200 million in anticipated revenues for the potential cost of the Affordable Care Act and due to future global economic uncertainty. Republicans successfully fought off Democratic attempts to spend the extra revenue on projects, stressing the need to be prudent in budgeting for the future.
"I proudly voted for the budget this year. While the stalemate in Washington has yet to produce one, Tennessee's leaders came together to craft a balanced budget that slashes spending by 2 percent while still providing millions in tax relief to all Tennesseans. This fiscally responsible plan will return tax dollars to their rightful owners and improve the economic outlook for Tennessee," said Rep.Watson.
Republicans promised voters that in addition to balancing the budget, taxes would be cut as well. The 2012-2013 budget includes the first phase of the death tax elimination, which will be completed in 2016. Supporters argue that the measure will not cost the state money, and instead will boost revenues. Further, Tennessee is one of only two states in the Southeast with a death tax, forcing those affected to flee to nearby states. The full repeal will represent a $94.6 million tax cut.
Republicans argued the death tax breaks up family farms and small businesses, forcing families to make difficult decisions at what is often the most difficult tie in their lives: the passing of a loved one. In many cases, families are faced with selling off parts of farms and land or closing a small, family-owned business in order to pay the tax bill. With the elimination of the harmful tax, Tennesseans will benefit and prosper.
Going hand-in-hand with death tax elimination is the complete elimination of the gift tax this year, a $14.9 million tax cut. Tennessee is one of only two states--the other being Connecticut--that imposes a gift tax. Tennesseans are subject to it if more than $13,000 in cash or assets are gifted even to a family member. As families pass land, businesses, and homes down to future generations Tennessee collected. Now, the fruits of this labor can transfer to the next generation without paying a hefty tax.
The Tennessee General Assembly also reduced the food tax this year from 5.5 percent to 5.25 percent, saving $22 million for all Tennesseans. As food and gas prices continue to increase, the food tax cut will put money back in the pockets of hard working Tennesseans. Both Governor Haslam and legislative leaders have vowed to further cut the tax in the subsequent years.
Legislative leaders put money aside for future
As state leaders await the United States Supreme Court opinion on the federal healthcare takeover, the decision was made to refrain from spending some $250 million in anticipated future revenue to curb the potential cost of the law. If the Supreme Court does not overturn the law, Tennessee could be expected to pay 1.5 billion over five years. Further, members of the Haslam Administration stressed that the money should be saved due to global uncertainty. Currently, Tennessee is faring better than most states because of prudent budgeting. Republican House leaders point to the the state's AAA+ bond rating, meaning Tennessee's economic outlook is currently better than the United States government. In addition $50 million is being restored to the state's Rainy Day Fund to boost it to a projected $356 million by June 30, 2013.
Priorities still funded
Legislative leaders prioritized spending and fully funded education, TennCare, and several crime initiatives. In addition, the budget restores over $120 million of previous cuts to core services. Leaders have stressed that government should be lean and efficient, while providing the best services possible to Tennesseans.
The state's Basic Education Program (BEP)--the mechanism for funding public schools--was fully funded at $5.3 billion. The BEP funding contains an additional $47.8 million for annual growth and inflationary adjustments as well. Likewise, higher education funding was increased by over $81 million, bringing the total appropriation to $3.8 billion.
Earlier in the year, Governor Haslam announced his Public Safety Plan, which aims to address violent crime in Tennessee. Among the measures funded fully in the budget are laws addressing gang violence, prescription drug abuse, repeat domestic violence offenders, and synthetic drugs.