Once again, in last week’s paper, I have read the “Capitol Hill Review” graced by a picture of our State Representative Mary Littleton, and once again I am left wondering just what the heck our elected officials think they are doing. The article calls the recently-ended session “one of the most successful … in Tennessee history,” a description which must astound most people who have suffered through it from the vantage point of interested and affected citizens.
Enough has already been said and written about the lack of substantive legislation produced by this Republican-dominated session, other than a workers’ compensation law which businesses may appreciate but which supporters for working people view as unnecessary and unfair. Enough has also been said and written about embarrassments such as the “guns in trunks” law and the “ag-gag” bill (which the Governor is still pondering), as well as numerous other crackpot measures that failed to pass despite the Republicans’ overwhelming majorities in both houses.
Enacting a State budget that met the needs of our citizens seemed to be almost an afterthought in the 2013 legislative session, but the “Capitol Hill Review”praises the Republican House to the skies for the amounts it was able to cut, seemingly without serious consideration of the consequences. It seems that whoever wrote this review automatically assumed that any tax cut or spending reduction is a substantial achievement regardless of who gets hurt.
First, the review reports that the budget for fiscal 2013-14 targets another $100 million for the State’s “rainy day” fund, continuing the trend in recent years of hanging on to “extra” money as though the recession of the late-2000’s were still in effect. Back in fiscal 2010-11, Tennessee wound up with a $269.4 million budget surplus, followed by a $543 million “overcollection” in fiscal 2011-12; and the rainy day fund balance at the end of fiscal 2012-13 was expected to be $356 million, all according to the authoritative “Sunshine Review” and related sources. Suggestions during this period to re-direct these surpluses to easing of tuition hikes at State colleges and universities and the like have usuallly been rebuffed.
Adding another $100 million to the rainy day fund, then, would seem to leave nearly half a billion dollars sitting there while State officials purport to be worried about, for example, the incidental costs of accepting the Federal funds on offer for expansion of TennCare eligibility. Whatever the exact amount of idle funds turns out to be, Tennessee appears to be following the course set by the private sector of accumulating piles of cash rather than putting the money back into the economy and, in the State’s case, into ensuring that services and benefits are provided to individuals and families who need them.
Nor is that all. As the “Capitol Hill Review” proudly states, the Republicans in the legislature have set their sights on elimination of the Tennessee estate tax and of the Hall tax on dividends and interest, which they have suddenly discovered (after 84 years on the books) is actually a tax on income, albeit of the unearned variety. The estate tax is on target to be eliminated by 2016, representing a $94.6 million annual reduction in revenue. As the review argues, this tax can occasionally cause problems for small family farms and businesses; but a modicum of planning on behalf of the State and the taxpayer can or should be able to minimize these effects. The truth is that completely doing away with this tax, and with it the revenue it raises, benefits primarily those wealthy Tennesseans who have accumulated large amounts of money and property.
Similarly, the Hall income tax may affect some elderly people who live off their investment accounts, although the number of low-income individuals who receive substantial interest and dividend payments cannot be very great and is surely dwarfed by the number of well-off individuals who would benefit the most from abolition. This year’s legislation expands the exemption of senior citizens from the Hall tax from those with total incomes up to $26,200 to those with incomes up to $33,000 for single filers, and from $37,000 to $59,000 for those filing jointly. Not a huge impact, perhaps, but complete abolition as is being contemplated would mean some serious money. The Hall tax has brought in as much as $290 million annually, and last year it raised some $172 million, of which $62 million was returned to the counties and cities ($117,000 to Cheatham County and a high of $12.5 million to Knox County). This share-the-wealth feature of the Hall income tax creates a curious dynamic whereby State legislators can take the bows for cutting taxes while local officials bear the burden of replacing (or not being able to replace) the lost funds and services.
To its (partial) credit, the legislature has slightly reduced the State sales tax on food by one-half of a percent, from 5 1/2 to 5%, in the last two years. It also advanced toward final voter approval of a State constitutional amendment explicitly banning any State income tax on wages or payrolls. At this rate, especially if the current balance of power prevails, the State will have to resort to raising the general sales tax—already at 9.75% (including the county share) in some localities—in order to meet unforeseen future emergencies or even, eventually, to carry out the basic functions of government. It seems unlikely that the sales tax, one of the most regressive sources of revenue, can be reduced anytime soon because of the ongoing elimination of so many alternatives—which mainly benefits the well-to-do.
Meanwhile, the façade may be starting to crack, as evidenced recently by the virtual collapse of two departments of State government (Labor and Workforce Development, and Children’s Services). The news came out during the legislative session that 34 career centers (for job training and placement) were about to be closed; and in addition, the already minimal Tennessee unemployment benefits (averaging $235 a week) were further reduced for long-term unemployed individuals because of the effects of the Federal budget “sequester” and the State’s unwillingness or inability to make up the difference. In addition, payments for the dependents of those without jobs were eliminated by this year’s legislature. Certainly the $43 million in budget cuts trumpeted by the “Capitol Hill Review” and the $100 million stashed away in the rainy day fund could have alleviated some of these problems.
But the biggest of all this year’s self-inflicted fiscal wounds was Governor Haslam’s decision during the legislative session to reject literally billions of Federal dollars over the next decade that were available for the asking under the Affordable Care Act (Obamacare) for expansion of TennCare eligibility. This money—which the legislature was likely to veto even if the Governor had accepted it—would have created thousands of new jobs in the healthcare sector and kept many small and rural hospitals in operation that may now go under. Primarily, of course, the expansion would have meant access to medical care for 200,000 or more Tennesseans who may now have to go without. Haslam is said to be working on a “Tennessee Plan” for using Federal funds to provide care another way, but right now the TennCare expansion is just another pot of money that our low-rent State government has walked away from.
In other words, saying the 2013 legislative session was one of the most successful in history may turn out in the long view to have been a serious exaggeration. The ultimate result depends upon how much longer the average Tennessee voter is going to put up with the kind of nonsense that went on this year.
Michael S. Lottman