Haslam Proposes to Lower Taxes on Inheritances, Groceries

Gov. Bill Haslam has proposed to incrementally lower both the Tennessee sales tax on groceries and the state inheritance tax as part of a package of 55 bills his administration will push in the legislative session that began Tuesday.
Other highlights of the legislative package as outlined by Haslam at an afternoon news conference would:
-Overhaul “antiquated” rules and laws for hiring, firing and paying state employees. Haslam said the changes would “simplify” the hiring process, change the method of laying off workers and “streamline” the appeals process for workers who believe they were fired or disciplined illegally.
-Change laws that set teacher salaries on the basis of seniority and training so local school districts will have “flexibility to make decisions such as how to address hard to staff schools or subjects along with rewarding teacher performance.”
-Eliminate average class size requirements in schools, though there would still be a limit on the maximum number in any given class, varying by grade levels.
-Increase the amount of direct cash grants given to businesses that locate or expand in Tennessee, though declining to give a figure at this point on how much money would be involved. The cash would be provided “only in exceptional cases” providing jobs to Tennesseans, Haslam said.
-Restructure 22 state boards and commissions, including the Tennessee Regulatory Authority. The TRA, which now has four full-time directors and no executive director, would instead have five part-time commissioners and an executive director, who would be appointed by the governor.
-Require that the executive director of the Tennessee Higher Education Commission answer to the governor rather than the THEC board. Haslam said he thinks the governor, who appoints the commissioner of K-12 education, should have the same authority over the agency that oversees higher education at the University of Tennessee and the Board of Regents.
On the tax bills, Haslam is effectively backing both a call from House Speaker Beth Harwell for reducing the state’s inheritance tax and backing a call from Democratic legislators for reducing the sales tax on food. Lt. Gov. Ron Ramsey, meanwhile, has been calling for reduction of the Hall income tax on dividends and interest – a move that is not part of the Haslam plan.
Tennessee’s inheritance tax now applies to estates of $1 million or more. Haslam said his bill will raise that exemption to $1.25 million in the coming year, resulting in a loss of about $15 million of state revenue. His long-range plan, the governor said, is to raise the exemption level over a five-year period to $5 million, which is the current level of the federal estate tax exemption.
The state sales tax on grocery food is currently 5.5 percent, already lower than the general state sales tax of 7 percent — though local governments may add up to 2.75. Haslam proposes to lower the rate to 5.3 percent effective July 1, costing the state about $18 million in lost revenue. The governor said he push to lower the state tax groceries to 5 percent in steps over the following two years, providing tax relief that will “benefit every Tennessean.”
The governor said Tennessee’s inheritance tax is now higher than most other states, prompting “a whole lot of people” to leave the state as they age.
“It’s cheaper to die in Florida,” he said, predicting that, in the long term, a $5 million exemption will mean more overall tax revenue for the state.
Haslam said the grocery tax reduction is “the only way to really touch every Tennessean in a significant way.”
“So we felt like it was important to do both at the same time,” he said.
Harwell and House Democratic Leader Craig Fitzhugh both praised the tax-cutting plans. Ramsey, who was attending a hearing on Senate redistricting, did not attend.
Haslam said he is sympathetic to cutting the Hall income tax, but there is a need to balance that with the state’s need for revenue.
The governor insisted his proposed change of civil service rules would not mean a return to the patronage system of bygone days in Tennessee politics. Currently, state employees are in two categories – those covered by civil service who can be dismissed only under specified circumstances and those in “executive service,” who may be fired at will.
Haslam said only 15 percent of executive service employees who served in the Bredesen administration that have left state government.
The 55-bill package compares to just 24 bills last year from the governor, who has indicated plans to take a more assertive role in the 2012 session.
NOTE: News release below

News release from governor’s office:
NASHVILLE – Tennessee Gov. Bill Haslam today announced his priorities for the 2012 legislative session during a press conference where he was joined by legislators in the Old Supreme Court Chamber of the Capitol.
His legislative agenda is designed to move Tennessee forward by supporting his goal to make Tennessee the No. 1 location in the Southeast for high quality jobs through economic development efforts, meaningful education reform, a more efficient and effective state government and improved public safety.
“The legislative leadership of the General Assembly is committed to a productive and efficient session, and I’m proud to support their efforts by introducing our legislation today, the first day of session, and presenting them with a budget in the next several weeks,” Haslam said during the press conference. “These bills reflect my priorities in moving Tennessee forward by focusing on issues that make a difference through performance, accountability and efficiency in state government.”
The governor’s legislation:
· Strengthens the Department of Economic and Community Development’s FastTrack program by budgeting more for the grants and giving the department more flexibility in utilizing them to attract and grow Tennessee jobs.
· Gives local school districts more options in how they approach classroom instruction and teacher compensation by:
o Maintaining maximum class size requirements but eliminating average class size mandates for each school, and
o Eliminating the outdated requirement of state and local salary schedules based strictly on seniority and training, which will give districts flexibility to make decisions such as how to address hard to staff schools or subjects along with rewarding teacher performance.
· Outlines Tennessee specific goals for measuring progress to replace the federal measurements as part of the state’s No Child Left Behind waiver request and better defines the scope and focus of the Achievement School District in supporting Tennessee’s lowest performing schools.
· Restructures 22 state boards and commissions to eliminate duplicative functions and provide more accountability and oversight of the agencies, which is a first step of an ongoing comprehensive review process.
· Updates and reforms the state’s antiquated employment system through the TEAM Act (Tennessee Excellence Accountability and Management) by simplifying the hiring process, providing flexibility to retain and reward outstanding employees and streamlining the appeals process for employees.
· Takes a first step in reaching the governor’s goal to raise the state inheritance tax exemption from $1 million to $5 million by increasing it to $1.25 million to lower the tax burden on family farmers and family business owners as these businesses span generations.
· Lowers the state portion of the sales tax on food from 5.5 percent to 5.3 percent with the goal of lowering it to 5.0 percent in three years.
Also filed today as part of the governor’s legislative package are a series of bills that were announced last week to address public safety issues including prescription drug abuse, tougher sentencing for certain types of gang-related crimes, tougher sentencing for gun possession by those with prior violent felony convictions and mandatory jail time for repeat domestic violence offenders. This legislation is part of a comprehensive, multi-year public safety action plan by the Governor’s Public Safety Subcabinet Working Group, which is made up of representatives from 11 state departments and agencies. The plan is a result of months of meetings with more than 300 public safety professionals and stakeholders across the state.
“This legislative agenda is made up of a strategic group of bills aimed at impacting key issues that are crucial to tackle now,” Haslam continued. “I look forward to working with the Legislature on these important initiatives.”
The Haslam administration filed a total of 55 non-budget related bills today. For more information about the governor’s legislative agenda, please visit http://forward.tn.gov.

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