Gov. Bill Haslam has some advice for eager fellow Republicans in the state Legislature who plan to push tax cuts in the session that begins in January, reports the Chattanooga TFP: Find cuts in government operations to make up the revenue losses.
“I think for me … any discussion about changes to the revenue in the state should be part of a broader discussion that also includes the state’s expense structure,” Haslam told reporters on Monday.
Haslam said “it’s easy to talk about the revenue part, then we talk about the expense part it gets a little harder.”
He said as a Republican, “I believe in cutting taxes. We’ve cut taxes since we’ve been here. We also believe in balancing the budget. And I think it’s important when you’re talking making any changes to revenue in the state, what are the commensurate changes you’re going to make in the expense structure as well?”
Several lawmakers have already said they plan to renew their push to phase out Tennessee’s Hall income tax on stock dividends and interest on taxable bonds.
Meanwhile, House Majority Leader Gerald McCormick, R-Chattanooga, and Senate Majority Leader Mark Norris, R-Collierville, said last week lawmakers should have a broader discussion about tax reform in general.
The logical place they suggest it start is on lowering Tennessee’s sales tax — one of the nation’s highest — from 7 percent to 6.75 percent.
Eliminating the Hall income tax and lowering the state’s sales tax would each result in about a $250 million annual loss to the state budget.
In the last fiscal year ending June 30, Haslam was forced to scrap planned pay raises for teachers and state workers because tax revenues fell substantially below projections. In fact, that resulted in the state having to cut spending and use reserve funds to make up for the $276 million shortfall. And losses last year manifest themselves in this year’s budget.
The problem was largely due to a sharp fall off in franchise and excise tax collections.