(May 8, 2012) The House of Representatives last week concluded its work for the 107th General Assembly. By all measurements, Tennessee taxpayers will benefit from the many accomplishments of House lawmakers over the last two years. Legislators vowed to make private sector job creation the top 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 “sine die,” meaning” without a day specified for a future meeting” because it is the conclusion of legislative business. Each General Assembly has 90 days over two years to meet. By adjourning on the 84th day, taxpayers saved nearly $200,000. Representatives ushered through a number of items to cut taxes, grow Tennessee’s economy, reform government and education, and fight crime. Legislators believe these initiatives reflect the will of Tennesseans and will help make Tennessee a better place to live, work, and raise a family.
The Speaker of the House 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 more tax relief for Tennesseans than any year of my tenure, reduce the budget by two percent, and put $50 million away for a rainy day. We understand that when a surplus of money comes in, we should return it to its rightful owners: the taxpayers.”
Throughout the summer and fall of 2011, lawmakers met with business leaders and concerned citizens about ways to remove government hurdles to economic growth in the State. The House Majority Leader appointed a House Majority Small Business and Economic Development task force, charged with identifying concerns of business and community leaders and exploring ways to reduce government—thereby allowing the private sector to expand in Tennessee. The group ultimately produced several job growth and government reform bills lawmakers passed during the session.
House Cuts Taxes for Every Tennessean
During the 2010 election cycle, House leaders promised they would do everything 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. Supporters argue that the measure will not cost the State money, and instead will boost revenues. Further, 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.
Conservative lawmakers argue the death tax breaks up family farms and small businesses, forcing families to make tough decisions at what is often the most difficult times in their lives: the passing of a loved one. In many cases, families are faced with selling off parts of farms and land or closing a small, family-owned business in order to pay the tax bill. With the elimination of this harmful tax, Tennesseans will benefit and prosper.
Gift Tax Repealed
Going hand-in-hand with death tax elimination is the complete elimination of the gift tax this year—a $14.9 million tax cut. Tennessee is one of only two States in the nation—the other being Connecticut—that imposes a gift tax. Tennesseans are subject to it if more than $13,000 in cash or assets are 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.
“This is a landmark moment for Tennesseans,” stated the House Majority Leader. “We believe, when government revenues are higher, that money doesn’t belong to the State but to taxpayers and should be returned to them immediately. Our Majority was placed here to balance the budget, cut wasteful spending, and lower taxes. Today we carried through on that promise.”
One Representative, who guided the death tax repeal to full House passage, remarked, “Today is an exciting day. We looked at the numbers, rolled our sleeves up, and worked with the Governor to come up with two bills that will really benefit all Tennesseans. The repeal of the death tax is especially noteworthy because it will help convince the job creators in our State to remain here and help grow our economy. This doesn’t benefit one group; it benefits any Tennessean who is concerned about job growth.”
Another Representative, a critical cosponsor of the measure to repeal the death tax and vocal proponent for small businesses, immediately applauded the move. “With this action, we are ensuring families and small businesses won’t be harassed by government with harmful taxes after a loved one passes. Not only is this legislation pro-business, it is also pro-family.”
The food tax cut was the responsibility of a Middle Tennessee Representative. Following the final vote on the bill he stated, “This wasn’t a partisan move, it was a move to help every Tennessean. The Governor asked to work with us on lowering the food tax and this is the product of that hard work. It’s something we all can be proud of.”
“These tax cuts are proof of our motto: It matters who governs,” concluded the Majority Caucus Chair. “A recent study shows a repeal of the death tax ten years ago would have grown our economy an additional 14%. While the previous generation of leadership failed to take action, this generation of conservative leadership is committed to charting a new path that creates jobs and limits government.”
House Passes 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.
One Representative stated, “America was built on the notion of self-reliance. Our tax code should reflect that principle and provide greater flexibility for taxpayers. Countless studies have shown income taxes are hurtful to State economies and harmful to the financial well-being of taxpayers while a sales tax allows taxpayers to be in charge of their resources. With this vote, we are fulfilling our promise to Tennesseans that we will protect them from wasteful spending and government actions that hurt job creation in the private sector.”
In passing SJR 221, the Majority painted a strong contrast between how government operates in Tennessee and the dysfunctional ways of the federal government in Washington.
“SJR 221 removes all doubt about whether Tennesseans should have an onerous income tax levied against them,” stated the Chairwoman. “Clearly, we hear what the voters are telling us. I would hope Washington would do the same and get the federal government out of the way of America’s job creators.”
House Majority Passes Key Economic Proposals
FastTrack Grants
The House of Representatives unanimously passed a key piece of the Majority’s economic agenda that would help economically distressed parts of Tennessee.
House Bill 2344 was approved by a 96-0 vote.
The bill repurposes the FastTrack economic development program, which provides grants and loans to local governments or to their economic development organizations, to 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.
“This bill helps Tennessee job creators, especially in those areas that have been hardest hit during the recession,” stated the bill sponsor. “By maintaining strong transparency requirements and oversight of this program, Tennesseans can have confidence we are expanding the mission of a program that has provided real job and economic growth results. Tennesseans want more career opportunities and I believe this program will help our business leaders and entrepreneurs deliver just that.”
For additional information about HB 2344, click here.
Small Business Incentives Act Moves through the House
The House of Representatives moved legislation to 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. Members of the House Majority have consistently proven they are committed to removing regulatory roadblocks and refashioning government to be a resource for job creators in Tennessee. This legislation provided more evidence of this long-standing commitment.
Under House Bill 2612, the General Assembly directs the Department of Economic and Community Development, in conjunction with the Office of the Comptroller’s Small Business Advocate, to develop a web page to aid job creators desiring to form a small business in obtaining information concerning State laws, regulations, and requirements that apply to the specific type of small business the user desires to form. The web page must contain hyperlinks to relevant laws, regulations, and requirements.
Nexus Legislation
In an effort to codify the agreement reached last year between the Governor and officials from Amazon.com Inc., one Representative moved legislation through the House that will help Tennessee develop and maintain 3,500 jobs in the State.
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.
“Simply put, this is a jobs bill for Tennessee,” stated the lawmaker. “It ensures a partner like Amazon and similar companies will participate in our system and it keeps all businesses on a level playing field. Most importantly, it ensures 3,500 positions are going to be created and remain here in Tennessee.”
Additional Tort Reform Measure Passes House
Legislation 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 passed the House. 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
The House advanced legislation to provide transparency and accountability in tax increment financing (TIF) law. Additionally, 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.
Ginseng for Jobs
While many may be unfamiliar with the product, wild ginseng is actually harvested in Tennessee and comprises a $5 million industry in the State. The legislation, HB 2768, aligns the reporting requirement for ginseng dealers to the new start of the harvest season. The change was necessary due to a new federal rule. The bill ensures the continuation of this important industry. The bill was approved by a vote of 89-0.
Reducing Burdens on Small Businesses
Small business owners will see one of their regulations cut thanks to legislation that passed the House. House Bill 2406 will reduce a burdensome requirement on small businesses. It is designed to 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. The bill sponsor described the measure as a common sense “taxpayer protection” bill.