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Fiscal Cliff Deal Included TN Sales Tax Deductability

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Part of the “fiscal cliff” tax bill approved by Congress extended the ability of Tennesseans to deduct sales tax payments from their federal income taxes, reports the Commercial Appeal. But that didn’t stop Rep. Marsha Blackburn, a longtime advocate fo sales tax deductability, from joining other Tennessee Republican congressmen in voting no.
Back when she was a freshman, U.S. Rep. Marsha Blackburn worked with then Senate Majority Leader Bill Frist of Tennessee to permit Tennesseans and other filers in states without income taxes to deduct sales taxes on federal returns. As recently as Nov. 16, Sen. Lamar Alexander, R-Tenn., was calling Blackburn “the leader in restoring the deduction in 2004 and she’s the leader now in an effort to ensure it is extended again.”
But on New Year’s Day, when the extension was made part of the deal to avert the fiscal cliff, Blackburn and every member of the Tennessee congressional delegation except U.S. Rep. Steve Cohen, D-Tenn., voted against it.
Alexander and Sen. Bob Corker, R-Tenn., also voted for the deal that included extending the deduction, which can be used by the roughly 25 percent of Tennesseans who itemize their deductions rather than taking the standard deduction.
Asked to explain her vote, Blackburn said in a statement, “Restoring sales tax deductions was one of the first pieces of legislation I helped pass when I came to Congress. As is the case with most pieces of legislation we debate, there were obviously provisions in the bill that I was happy to see included such as the extension of the sales tax deduction, which is very important for my constituents in Tennessee.
“However, as a total package, the Senate bill was a bad deal for the American people. It only makes our situation worse. I could not support a proposal that imposes job-killing tax hikes, does nothing to restrain spending, adds to our annual deficit, and increases our debt by nearly $4 trillion over the next decade.”

TN House Delegation 8-1 Against Fiscal Cliff Deal (with some statements)

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Democrat Steve Cohen of Memphis was the only member of the Tennessee delegation to the U.S. House who voted in favor of the “fiscal cliff” legislation that was approved by a 257-167 bipartisan vote on New Year’s day.
Here’s how the Tennessee delegation voted:
Voting no in the House were Republicans Phil Roe, John Duncan, Chuck Fleischmann, Scott DesJarlais. Diane Black, Marsha Blackburn, and Stephen Fincher. Democrat Jim Cooper also voted against the measure.
Democrat Steve Cohen was the only yes vote among the Tennessee delegation in the House.
In the early morning vote in the Senate, Sens Lamar Alexander and Bob Corker, both Republicans, voted in favor of the bill.
==Here are news releases from Tennessee congressmen on their vote: (Alexander and Corker statements are on an earlier post, HERE.)
From Rep. Jim Cooper:
WASHINGTON – U.S. Rep. Jim Cooper (TN-05) issued the following statement today after voting against H.R. 8, the American Taxpayer Relief Act, which adds nearly $4 trillion to the debt over the next 10 years:
“No real spending cuts. No real deficit reduction. No acknowledgement of America’s out-of-control national debt. This is a popular vote today, but it will harm America in the long run. It is good to see a return to bipartisanship, but not when it makes our fiscal problems worse.
“Congress is missing the chance of the decade to adopt a large, balanced deficit reduction plan such as Simpson-Bowles that combines tax relief with controlling federal spending.
“In just a few weeks, America will face another debt-ceiling crisis as well as sequestration. Today’s fiscal Band-Aid may feel good now, but its relief will not even last until spring.”
Cooper has long favored a balanced, bipartisan approach to tackling the national debt and fiscal cliff. He and U.S. Rep. Steve LaTourette (R-OH) introduced the only bipartisan budget last spring, based on recommendations from the Simpson-Bowles fiscal commission.
The Cooper-LaTourette budget was the only budget plan to receive bipartisan support in the House last year, and was widely praised by editorial boards across the country. Cooper and LaTourette were honored by the Concord Coalition in September 2012 for their political leadership and work to reduce the debt.
—

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Lamar & Bob Talk Medicare Cuts and Other TN Fiscal Cliff Notes

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Alexander, Corker Join on Fiscal Cliff, Medicare Cuts:
Focus on Medicare, Not Taxes During news conferences on Friday, U.S. Sens. Lamar Alexander and Bob Corker predicted that the “fiscal cliff” tax situation will be resolved and decried another “fiscal cliff no one wants to talk about, the looming bankruptcy of Medicare,” reports the Bristol Herald-Courier.
There was a lot more reporting on the matter. A sampler:
Congress will act within days or weeks — perhaps even this weekend — to stem any increase in income taxes for almost all Americans in response to an inevitable public outcry, The Tennessean reported.
“I would like them (taxes) to stay the same (for everybody), but I am not king here,” Alexander said at a joint press conference with his Tennessee colleague.
The article also has comments from the two senators saying they still think they did the right thing in voting for the package of legislation that brought on the “fiscal cliff.” U.S. Reps. Marsha Blackburn and Scott DesJarlais offer similar comments — though Blackburn voted for the bill in question, DesJarlais against.
From the News-Sentinel: U.S. senators Lamar Alexander and Bob Corker said Friday taxes will not increase for most Americans and insisted “fiscal cliff” negotiations will either address pending hikes before Monday’s deadline or through retroactive legislation in the new year.
With that confidence, Tennessee’s senators turned to spending cuts and offered a proposal to exchange a $1 trillion reduction in entitlement spending — mostly from Medicare — for a $1 trillion rise in the federal debt ceiling.
“Taxes is not the biggest uncertainty,” Alexander said. “That is the possibility that all of those Americans who depend on Medicare to pay for their medical bills to fall off the fiscal cliff because Medicare goes bankrupt.”
The plan, which the senators have dubbed the “Dollar for Dollar Act,” was introduced by Corker on Dec. 12. Its details include reforming Medicare to include competition from private health-care options, gradually raising the eligibility age to 67 by 2027, requiring high-income beneficiaries to pay higher premiums and giving flexibility to the states to manage the program.
‘Total Dereliction of Duty’
CBS News aired a Corker interview wherein he chides President Obama and congressional leaders for “a total dereliction of duty at every level” and “a lack of course to deal with the spending issues.”
“I’m very surprised that the President has not laid out a very specific plan to deal with this,” said Corker, admitting, “Candidly, Congress could have done the same. And I think the American people should be disgusted.”
While Corker granted that “98 percent of the people in our country can be assured…their income taxes are going to be the same,” he argued, “We here in Washington are going to hurt the American economy, we’re going to hurt Americans at every level, and to me it’s just a travesty that we’ve not been willing to deal with this issue.”
And Corker did not predict much progress from (Friday’s) meeting between the President and congressional leaders, predicting a “worst case scenario” in which “We’ll kick the can down the road…we’ll do some small deal, and we’ll create another fiscal cliff to deal with this fiscal cliff.”
There’s a Milk Cliff,, Too
Tennessee dairy farmers soon could get paid substantially higher prices for their milk, but they’re not relishing the prospect, says The Tennessean. Instead, they fear it could make milk so expensive — potentially as much as $6 to $8 a gallon, by some estimates — that even more people stop drinking it.
“I don’t think it would kill our industry, but it would seriously injure it,” said Deborah Boyd, secretary/treasurer of the Tennessee Dairy Producers Association.
Those “dairy cliff” fears are based on Congress’ inability to pass a new five-year farm bill to replace one that is set to expire on Monday. The bill outlines how the federal government determines prices paid to dairy farmers.
Unless a new bill is passed or the current one is extended — Congressional leaders said Friday they were working on an extension — a 1949 law would take effect. That law would force the U.S. Department of Agriculture to pay roughly $38 per 100 pounds for milk, or double the current prevailing price.
Experts say that would ultimately increase the retail price for milk, which now averages $3.59 a gallon, as well as for other dairy products such as cheese and yogurt.
DesJarlais: Republicans Frustrated
House Republicans feel stymied but not hopeless as they prepare to return to Capitol Hill for possible last-minute action to avoid the “fiscal cliff,” Republican Rep. Scott DesJarlais tells The Tennessean.
DesJarlais, of Jasper, Tenn., was one of 234 members of his caucus who listened in on a conference call Thursday with House Speaker John Boehner of Ohio. Boehner said the House will return to work Sunday at 6:30 p.m. and remain in session in case lawmakers and President Barack Obama reach agreement on a deal to avoid more than $600 billion in tax increases and spending cuts that will otherwise take effect on Tuesday. Economists fear the combination could jar the nation’s economy back into recession.
DesJarlais said in an interview from his Tennessee home Thursday that it’s up to the Senate to come forward with a plan now, an opinion also expressed by Boehner. “But all we are hearing is crickets,” DesJarlais said. Asked if Republicans feel a lack of hope about a possible solution, he said, “It’s more frustration.”

AP Profiles ‘Pragmatic and Peripatetic’ Bob Corker and His New ‘Outsized Role’

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By Donna Cassata, Associated Press
WASHINGTON — Republican Sen. Bob Corker is spending a lot of time lately talking to Democrats.
The freshman lawmaker from Tennessee unveiled his own 10-year, $4.5 trillion solution for averting the end-of-year, double economic hit of automatic tax hikes and spending cuts and then spoke briefly last week with Treasury Secretary Timothy Geithner. Deficit-cutting maven Erskine Bowles had forwarded Corker’s proposal to White House Chief of Staff Jack Lew.
Corker also was on the phone with Secretary of State Hillary Rodham Clinton for a 15-minute conversation about Libya and other issues. Not only is Corker a senior member of the Foreign Relations Committee, he is poised to become the panel’s top Republican next year, with a major say on President Barack Obama’s choice to succeed Clinton — possibly the divisive pick of U.N. Ambassador Susan Rice — and other diplomatic nominees.
Pragmatic and peripatetic, the conservative Corker has been deeply involved in negotiations on the auto bailout and financial regulations during his six years in the Senate, bringing the perspective of a multimillionaire businessman and a former mayor of Chattanooga to talks with Democrats and the White House.
“I don’t see him as a partisan,” said Democratic Sen. Mark Warner of Virginia, another multimillionaire businessman who has worked closely with Corker on banking and housing issues. “I think he’s somebody who’s willing to work with anybody who he thinks has a good idea.”
Next year, in the Senate’s new world order of a smaller Republican minority, the 60-year-old Corker is certain to play an outsized role, not only because of his high-profile standing on the Foreign Relations panel but because he is willing to work across the aisle in his eagerness to get something done. It is something of a rare trait in the bitterly divided Congress and one that often draws an angry response from the conservative base of the GOP.
It didn’t affect Corker politically. He scored a resounding win last month, cruising to re-election with 65 percent of the vote.
“I can count. I went to public schools in Tennessee and learned that to pass a bill it takes 60 votes and I know we have 45 going into next year,” he said in an interview with The Associated Press. “I came up here to solve problems, not to score political points, and yes, it was rewarding that after throwing ourselves into the most controversial issues there were and trying to solve things pragmatically we ended up in the place where we were in this last race.
“I’m more energized than I’ve ever been,” he continued. “The last two years of my first term were like watching paint dry because nothing was occurring and it was fairly discouraging and one has to ask oneself is this worth a grown man’s time.”
There were some doubts whether Corker, who made a fortune in real estate and had promised to only serve two terms, wanted to come back for more of a Congress riven by dysfunction and partisanship.
“At times I wondered if he would really run again,” said Tennessee Gov. Bill Haslam, who has known the senator for decades ever since Haslam’s older brother, Jimmy, the new owner of the Cleveland Browns football team, roomed with Corker at the University of Tennessee. “It kind of frustrates him, admirably so, when people aren’t focused on problem solving.”
Tom Ingram, a political consultant who has worked on Corker’s campaigns, said the senator deliberated on whether to run again. “He had to convince himself it was something worth doing before he did it,” Ingram said.
So Corker is back, with a black notebook that he grabs every morning to jot down problems and what he’d like to accomplish in a Senate where Democrats have strengthened their majority to 55-45, from 53-47.
On avoiding the so-called “fiscal cliff,” his 242-page bill challenges both Democrats and Republicans. Corker calls for a mix of tax increases and limits on Medicare and Social Security benefits. He would raise the Medicare eligibility age incrementally to 67 by 2027 and require wealthier retirees to pay higher premiums.
Although he would make all the Bush-era tax rates permanent, Corker wants to cap itemized tax deductions at $50,000, which would affect high-income taxpayers.
Corker recognizes that a final deal will be hammered out between Obama and House Speaker John Boehner, R-Ohio, but hopes his ideas earn some consideration.
A member of the Foreign Relations Committee since 2007, Corker has been frustrated with a committee that hasn’t produced an authorization bill in years and has become something of a backwater since its heyday of the 1960s and ’70s. His goal is to make the panel more relevant, and he wants to conduct a top-to-bottom review of all foreign assistance and spending by the State Department and U.S. Agency for International Development.
High on the list for the panel early next year will be nominations, including Obama’s choice for secretary of state and possibly U.N. ambassador.
For all of Republican Sen. John McCain’s recent bluster about Rice and her initial, much-maligned account after the deadly Sept. 11 raid on the U.S. diplomatic mission in Libya, it is Corker who will render his judgment and provide a crucial vote on her prospects. Corker has described Rice as more of a political operative but has avoided saying definitively where he stands on the potential nominee.
While other Republicans criticized Rice after her comments based on talking points prepared by intelligence officials, Corker traveled to Libya the first week of October to meet with officials there and learn more about what happened. The senator has traveled to 48 countries since he joined the committee.
“He’s viewed as conservative, but he’s independent,” said former Republican Gov. Don Sundquist.
After being appointed state finance commissioner by Sundquist, it was Corker who brought together various factions and helped Tennessee lure the Houston Oilers to the state. To complete the deal, Sundquist had to work with Nashville Mayor Phil Bredesen, a Democrat he had just defeated in the gubernatorial race.
Corker was like a child trying to make peace between warring parents. It paid off with the arrival of the Tennessee Titans in 1997.
One of Corker’s first jobs was good training for moving immovable objects, whether home-state politicians or members of the Senate. In college, Jimmy Haslam and Corker had a small business doing odd jobs, including removing tree stumps.
“I always give them both a hard time that the biggest thing they removed was the axle from two or three trucks that they ripped out trying to get the stumps out,” said Gov. Bill Haslam. “They were better at axle removal.”

TN Has a Fiscal Slope Even Without a Fiscal Cliff

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While national attention is riveted on Washington’s walk toward a fiscal cliff and the various steps backward, forward and sideways along the path, the matter is receiving some Tennessee attention because of the potential ramifications for the state and local governments.
On the spending-cut side of the fiscal cliff, projections are that Tennessee’s immediate loss of direct federal funding would be fairly modest by governmental standards, about $100 million by most estimates.
The tax increase side of the cliff could have a more substantial, though less immediate, impact. The President’s Council of Economic Advisers calculates, for example, that the increased payment of federal income taxes would translate into about $4 billion less in retail spending by Tennesseans in a year.
A day before that estimate was sent to the media last week, Stan Chervin, a state Department of Revenue veteran who serves as a consultant on state tax matters, spoke to the Tennessee Advisory Commission on Intergovernmental Relations in general terms on how the cliff’s increase in federal income and payroll taxes — actually the elimination of current tax breaks — translates into less disposable income: “All those things are going to reduce take-home (money) if they go away, and that’s what we use to buy stuff. And that’s how we run the state.”

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Fiscal Cliff Tax Increases Could Cut TN Tax Take

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Estimates of the direct impact on state government if “fiscal cliff” spending cuts take effect is in the $100 million range insofar as initial loss of federal money goes. But a longer term and deeper impact could come from tax increases and their impact on state spending and, thus, sales tax collections.
That was part of the message Wednesday at a Tennessee Advisory Commission on Intergovernmental Relations meeting. Andy Sher has a report.
If federal officials don’t resolve the so-called fiscal cliff, the impact of tax hikes on consumer spending likely will hit sales-tax dependent states like Tennessee the hardest, a tax expert warned Wednesday.
Dr. Stan Chervin said that absent an agreement in Washington, D.C., the expiration of Bush-era tax cuts and newer payroll-tax reductions will leave Tennesseans with less cash in their pockets.
“So what are you going to do with less? You’re probably going to spend less,” Chervin said. “All those things are going to reduce take-home [money] if they go away, and that’s what we use to buy stuff. And that’s how we run the state.”
About 54 cents of each state tax dollar comes from the state sales tax, which is among the highest in the nation. Unlike most states, Tennessee has no broad-based income tax.
…Chervin said federal tax increases include boosts in capital gains rates from 15 percent to 20 percent, higher income tax rates and elimination of the 2 percent payroll tax reduction pushed by Obama. Add them all up and that’s less money for most, he said.
“If you just follow the dominoes, yeah, less take-home [money], less retail sales, less sales tax — boom, boom, boom,” Chervin later told reporters. “So it is kind of scary.”

Corker Ready to Raise Some Revenue, Despite Pledge

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n a further indication that Republican attitudes are shifting on how to reduce the deficit, Sen. Bob Corker said Monday he no longer feels bound by the no-increase pledge he signed at the behest of an anti-tax activist.
From The Tennessean:
“I’m not obligated on the pledge,” Corker said during an appearance on the CBS show “This Morning.”
“I made Tennesseans aware — I was just elected — that the only thing I’m honoring is the oath that I take when I serve when I’m sworn in this January.”
However, Corker’s name, along with those of the eight other Republican members of Tennessee’s congressional delegation, remains on the anti-tax pledge that conservative lobbyist Grover Norquist’s group, Americans for Tax Reform, has been asking politicians to sign for the better part of three decades.
The pledge signals their promise to “oppose and vote against tax increases.”
Republican Sen. Lamar Alexander’s office Monday referred anew to a comment he made last year about not being bound by the Norquist pledge.
“My only pledge is to the United States flag and to the United States Constitution, and I’ve forsworn all others,” Alexander said in an interview with Roll Call, a Capitol Hill publication.
See also the Commercial Appeal story, led on Corker’s 242-page draft plan to forestall automatic tax increases and spending cuts by capping federal deductions at $50,000 for high-income Americans.
Corker did an op-ed piece in the Washington Post on the proposal.
And the AP has a national roundup on Republicans retreating from Norquist’s anti-tax pledge.

Federal ‘Fiscal Cliff’ Would Mean a Fall for TN, Too

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Tennessee state government would face a substantial revenue reduction if the federal government goes off the “fiscal cliff,” according to an Andy Sher report.
According to Pew, about 18 percent of federal grant dollars flowing to states would be subject to across-the-board cuts. That’s the case in Tennessee.
Using calculations from the Federal Funds Information for States, Pew said federal spending on education, nutrition for low-income women and children, public housing and other programs like special education would be impacted.
Tennessee Finance Commissioner Mark Emkes said the state’s own calculations show a loss of $85 million in calendar year 2013 in federal grant money. Among the hits is about $20 million for Title I, which helps low-income students. Another $20 million would come out of special education.
“Of course it would be easier for us if it did not occur,” Emkes said.
But he noted that the state required agencies last year to sketch out “hypothetical” cuts of 15 to 30 percent, depending on what actions the federal government takes to slash spending.
“We would of course prefer not to lose federal money,” Emkes said. “But we are mentally prepared if it goes away. …. We’ve proven we have what it takes to balance the budget.”
He said Tennessee is still trying to get further clarification on the impacts of cuts and tax increases.
In addition to state government, Tennessee would be hit by anticipated cuts to the Oak Ridge National Laboratory and other areas. Pew estimates federal spending on procurement, salaries and wages accounted for 4.9 percent of Tennessee’s gross domestic product in 2010.