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Phillip Johnson: Update From The Hill

The 107th General Assembly Comes to a Record-Breaking Conclusion (Part 1 of 2)

The Tennessee Legislature has concluded its work for the 107th General Assembly. By all measurements, Tennessee taxpayers will benefit from the many accomplishments of state lawmakers over the last two years as private sector job creation was a priority for the General Assembly. Managing the State’s budget in a fiscally responsible manner was also at the top of the agenda.

The session was adjourned at a record early date saving taxpayers nearly $200,000 in legislative costs. A number of items were passed to cut taxes, grow Tennessee’s economy, reform government and education, and fight crime which reflect the will of Tennesseans and will help make Tennessee a better place to live, work, and raise a family.

Speaker of the House Beth Harwell stated, “Tennesseans can be very proud of the fiscally responsible budget crafted this year. Unlike Washington, D.C. we balance our budget every year—a feat that does not come easily. In addition to these cuts, we were still able to provide tax relief for Tennesseans, reduce the budget by two percent, and put $50 million into our previously depleted rainy day fund.”

Taxes Cut for Every Tennessean

The Republican controlled legislature committed to maintain the State’s strong financial record, balance the budget, and return hard-earned taxpayer dollars to Tennesseans. Over the last two years, they have followed through on that promise. Following this session, every Tennessean will realize tax savings because of these policies.

Death Tax Eliminated

The 2012-2013 budget includes the first phase of the death tax elimination, which will be completed in 2016. Tennessee is one of only two States in the South with a death tax, forcing those affected to flee to nearby States. The full repeal will represent a $94.6 million tax cut and create an environment for people to move their resources and investments to Tennessee which will boost our economy and provide more job opportunities for our citizens.

An example of the harm the death tax presents is realized when family farms and small businesses are forced to liquidate after the death of a family member in order to pay the taxes due just because of the passing of a loved one. With the elimination of the death tax, Tennesseans will be able to retain their hard earned assets and resources instead of paying an unfair tax bill to the state government.

Gift Tax Repealed

Going hand-in-hand with death tax elimination is the elimination of the gift tax which is a $14.9 million tax cut. Tennessee is one of only two States in the nation that imposes a gift tax. Tennesseans are subject to it if more than $13,000 in cash or assets is gifted to, for example, a family member. As families pass land, businesses, and homes down to future generations Tennessee levied the tax on those individuals. Now, the fruits of this labor can transfer to the next generation without paying a hefty tax.

Food Tax Lowered

The General Assembly also reduced the food tax this year from 5.5 percent to 5.25 percent. This creates savings of $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 the Governor and legislative leaders have vowed to further cut the tax in the subsequent years.

Constitutional Amendment Banning State Income Tax

Signaling this would become a banner year for tax reform, House legislators early in the legislative session took the first step on an important measure to ban any income tax from ever being implemented on Tennesseans.

Lawmakers took a strong stand on behalf of taxpayers to ensure Tennesseans will never have to face a tax on the money they work so hard to earn. Lawmakers overwhelmingly passed a constitutional amendment, Senate Joint Resolution 221, to permanently place language in the Tennessee Constitution banning the implementation of an income tax. The amendment now must pass the next General Assembly by a two-thirds vote before being placed on the 2014 election general election ballot.

In passing SJR 221, the Tennessee legislature painted a strong contrast between how government operates in Tennessee and the dysfunctional ways of the federal government in Washington.

Key Economic Proposals Passed:

FastTrack Grants

The FastTrack economic development program, which provides grants and loans to local governments or their economic development organizations, will be used to facilitate pro-job growth activities. In passing the bill, it is the intent of the General Assembly that these economic development funds will only be used in exceptional circumstances when the funds will make a significant economic impact on the affected community.

Small Business Incentives Act

This legislation will provide small business entrepreneurs with a “one stop opportunity” webpage to help incentivize and encourage small business activity throughout Tennessee. Countless studies have shown small businesses are the backbone of Tennessee’s economy. Under House Bill 2612, the Department of Economic and Community Development, in conjunction with the Office of the Comptroller’s Small Business Advocate, will develop a web page to provide information concerning State laws, regulations, and requirements that apply to the specific type of small business the user desires to form.

Nexus Legislation

In an effort to codify the agreement reached last year between the Governor and officials from Inc. HB 2370 establishes requirements for determining whether certain business affiliates have a physical presence in this State sufficient to establish nexus for sales and use tax purposes. Nexus is a legal term referring to connection or jurisdiction within a State.

In the case of Amazon, this legislation will ensure the online retail giant will pay Tennessee sales taxes if a national online sales tax law is not passed by the federal government by 2014. Under the bill, the new Amazon fulfillment centers located across the State will meet the requirement for establishing nexus in Tennessee, ensuring fairness across the board. This bill should ensure 3,500 positions are going to be created and remain here in Tennessee.”

Additional Tort Reform Measure

Legislation was passed to add an additional exception to the limitations on noneconomic, punitive, and exemplary damages that were passed as part of the Tennessee Civil Justice Act of 2011. Under present law, compensation for any noneconomic damages suffered by an injured plaintiff may not exceed $750,000 for all injuries and occurrences that were or could have been asserted, unless the injury or loss is catastrophic in nature, in which case the amount of noneconomic damages awarded may not exceed $1 million.

Additionally, punitive or exemplary damages in a civil action may not exceed an amount equal to the greater of two times the total amount of compensatory damages awarded or $500,000.

Local Redevelopment Bill to Encourage Job Growth

To provide transparency and accountability in the tax increment financing (TIF) law,  House Bill 2231 streamlines the Tennessee Code to place all TIF references into one section. TIF is an economic development tool that local governments use to redevelop areas. Without TIF, some of the redevelopment projects may never occur, costing areas potential economic growth and jobs.

Reducing Burdens on Small Businesses

Small business owners will see one of their regulations cut. House Bill 2406 will reduce a burdensome requirement on small businesses and help avoid unreasonable penalties for taxpayers who have paid 90% of their franchise and excise taxes totaling at least $10,000 and need a simple extension. Those falling below the $10,000 threshold would merely need to properly request the extension.

New Jobs Coming around the State

Two recent studies of business-friendly states have put Tennessee at the top of the list. A recent U.S. Chamber of Commerce study says Tennessee is a leading “Enterprise State” for its remarkable environment of low taxes and navigable regulations.

The Chamber report notes “Tennessee’s low cost of living, fourth lowest State and local tax burden and manageable budget gap place it first in this year’s tax and regulation ranking.” The State moved up two places from last year’s ranking.

In the same vein, Chief Executive Magazine ranked Tennessee the 4th best State in the nation for business in 2012. Factors included a quality workforce, low taxes, friendly regulations, and good infrastructure.

160 New Jobs & $12 Million Investment Coming to Middle Tennessee

The Governor announced that Kyowa America Corporation will open a new facility in Portland, Tennessee, creating 160 jobs and investing $12 million. The company, a leader in automotive plastic injection molding, will locate at 1039 Fred White Blvd. in the Robertson County section of Portland and is expected to be operational by late summer.

More Nissan Jobs Coming for Rutherford County

Middle Tennessee received good news that Nissan Motor Corporation’s manufacturing plant, located in Smyrna, could eventually employ nearly 6,000 workers by early next year. That sum would be double the current total. Workers there are busy building two new crossover utility vehicles plus batteries and eventually the Leaf electric car will be built at the facility.

Fighting for More Jobs Nationally

House Resolution 195 supports the construction of the Keystone XL oil pipeline from Canada to Gulf Coast and encourages President Obama to approve TransCanada’s permit application for such project. Many energy analysts and economists believe the creation of this pipeline would help mitigate high gas prices as well as produce a substantial amount of new American jobs.

A Fiscally Conservative Balanced Budget With Priorities Fully Funded

Conservative balanced budget cuts taxes, reduces spending, and moves an additional $50 million to Rainy Day Fund

The State’s Budget was passed on a party line vote as Republicans overcame numerous spending proposals by the Democrat minority. In a 64-28-1 vote, the bill’s passage was the culmination of months of tireless work crafting a fiscally responsible budget. The $31.5 billion budget is a two percent reduction from last year, puts $50 million in the State’s Rainy Day Fund and includes three the significant tax cuts —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. Lawmakers successfully fought off several attempts to spend the extra revenue on projects, stressing the need to be prudent in budgeting for the future.

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 $200 million in anticipated future revenue to curb the potential cost of the law. If the Supreme Court does not overturn the law, the Affordable Health Care Act could require Tennessee to pay as much as $1.5 billion over five years. Further, members of the Governor’s Administration stressed that the money should be saved due to global uncertainty. Currently, Tennessee is faring better than most States because of prudent budgeting. House leaders point to Tennessee’s AAA+ bond rating, meaning our economic outlook is currently better than the United States government. .

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. Government should be lean and efficient, while providing the best services possible to Tennesseans.

Education Fully Funded

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.

Efforts to Fight Crime Funded

Earlier in the year, the Governor 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.

*Rep. Johnson serves the 78th District of the Tennessee General Assembly, which includes Cheatham, Williamson and Montgomery Counties.

Please feel free to contact Rep. Johnson with concerns you may have about state issues. 

Rep. Johnson can be reached by email at or by phone at 615-741-7477. 

Your input is always appreciated.

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