NASHVILLE, March 27, 2017– This last week offered a lot of action at the Capitol. Last Monday, I passed three bills. HB 121 authorizes rules and policies permitting the administration of medications for adrenal insufficiency in schools. Adrenal crisis is a life threatening condition and this bill would allow school officials, with proper training and consent of a parent, to administer the emergency medication.
HB 405 added pharmacists to the list of providers for credentialing with insurance companies. Right now, pharmacists assist patients with their management of conditions like diabetes, asthma, and anticoagulation. This bill would allow them to actually receive payment for these valuable services. As such, more pharmacists would be able to participate and it will improve patient care.
HB 344 makes the identifying information of the minor victim of a criminal offense confidential and not open to inspection by members of the public, unless a court waives the confidentiality at the request of the minor’s custodial parent. Minors, who have been victimized such as with child pornography or sex trafficking, should not have their identifiable information available to the public in a manner that would potentially be discovered and used to further victimize the minor in the media or social media. This bill received bipartisan sponsorship and was supported by our Sheriff’s Association, Chiefs of Police, and the Commission on Children and Youth.
On Tuesday, our health committee had a lively debate on medical cannabis with HJR 65. One of my concerns was that as the resolution was worded, it was a statement of intent that our state would be affirming a de facto monopoly to a manufacturer. Additionally, the federal government has failed to act on making cannabis a schedule 2 drug which would allow for better research in America. The resolution essentially affirmed that Tennessee was accepting of the federal failure. The HJR was overwhelmingly sent to summer study.
Perhaps the most anticipated news revolved around the gas tax proposal. The IMPROVE Act was a 395 million dollar transportation tax increase with an unequal decrease in other taxes. In addition, it was an unchecked tax increase at it was indexed to the Consumer Price Index. The Senate had previously amended the bill, and this week, the House amended it, as well. Here is my fiscal review of the amendment.
As it stands, the current proposal is a 347 million dollar tax increase. Roughly 186-190 million comes from a gas tax increase, about 100 million from a diesel tax increase, and approximately 57 to 58 million in other tax or fee increases.
The only tax decrease that impacts the average Tennessean or family is the grocery tax cut which is 125 million. The Franchise and Excise tax cuts are targeted at manufacturers and is a cut of 113 million. The other two tax cuts in the proposal are the reduction in the Hall Income tax and the restoration of the veteran and elderly property tax relief.
The Hall Income tax cut was passed last year, and should not even be part of the discussion for offsetting any fuel tax increase. It should be a priority in the budget before any proposed spending is allocated. Additionally, the tax does not impact the pocketbook of the average Tennessean; therefore it shouldn’t be included when determining whether any proposal is pocketbook neutral.
The House Veterans Caucus, essentially, called the use of the veterans and elderly property tax relief a shameful ploy to use veterans as an excuse to vote for the bill. In 2015, we were informed that the property tax relief for veterans and the elderly needed to be restructured in order for it to remain solvent. The AARP, the Trustees Association, members of the veterans caucus, and the administration lobbied to save the program by making cuts to it. In the past two years, Tennessee has had a 750 million dollar recurring surplus and a 957 million dollar recurring surplus. Surely, somewhere in the 1.7 billion dollar surplus, the Tennessee General Assembly could find a way to restore 6 million dollars in property tax relief to our veterans and elderly without raising a fuel tax.
Below is an infographic from the Sycamore Institute about the amended IMPROVE Act.
To be fair, I wanted to break down the tax increases. Every cent gas tax increase nets around 31 million and, depending on the source, 15-25% is paid by non-Tennesseans traveling through the state. The bulk is paid by individuals, families, and small businesses. The amended version asks for a 6 cent increase phased in over three years. If one assumes 25% is paid by non-Tennesseans, then the gas tax increase is around 142 million to Tennessee families and small businesses.
Every cent in diesel tax nets around 10 million with roughly 40%(depending on the source) paid for by travelers and out of state truckers. The other 60% is paid by Tennessee farmers, small and large businesses, and Tennessee drivers which is a net tax increase of 60 million on Tennesseans. Combined with the other taxes, of the 347 million proposed tax increase, it results in a net tax increase of around 260 million to Tennesseans.
However, one must, also, understand that increasing fuel taxes has two secondary effects. First, the costs of goods and services increases, and secondly, Tennesseans will be paying more sales tax due to the increase in prices. If one assumes an increase of 5% in the price of goods and services and a 10% sales tax, based on a 260 dollar net increase, it is an additional 39-40 million out of the pocketbooks of Tennesseans. Thus, the net effect of the plan to the pocketbooks of individuals, families, and businesses is at least a 300 million dollar tax increase, and as you can see, the tax increases are phased in over three years.
In my opinion, the 169 million in tax cuts from the Hall income tax and the property relief shouldn’t even be in this discussion. Those tax cuts should be prioritized in the budget to stand on their own merit and not conflated with fuel tax increases. So if we remove those taxes from the equation, we are left with around 238 million in tax cuts from groceries(125) and F&E(113).
Understanding that small businesses and farmers pay a portion of the 300 million net tax increases and that the targeted F&E cut and the grocery cut essentially leaves them out, the amended IMPROVE Act is a tax increase on small businesses and farmers. Secondly, understanding that the average individuals and families only receive 125 million in grocery cuts to a net 300 million tax increase, the amended version is still a tax increase to families. As such, I cannot support such a measure.
Currently, Tennessee raises around 1.6 billion in sales tax from tourism and around 900 million from auto sales tax. Combined, that is 2.5 billion auto and travel related revenue that has led to our massive surplus and doesn’t support our roads. If Tennessee would just use 15% of that revenue for transportation, then it would net around 375 million without any tax increase, increase in any cost of goods and services, or mathematical gymnastics. However, reallocating current revenue to transportation is not the posture of the Governor, Senate, nor many other legislators in the House. While, in my opinion, reallocation is the most simplified and rationale solution if we are going increase transportation funding, it is not the option in favor by many of my colleagues.
If the posture of the Governor and many legislators is to derive more fuel related taxes while offsetting others, as I explained above, it is my opinion that the amended version is 62 million short in tax cuts and unfairly places the burden on our hard working Tennessee families, farmers, and small businesses. To be more fair to families, farmers, and small businesses, the F&E cut would need to apply to all businesses, and the gas/diesel increase would have to be lowered to 5/8 or an additional 0.5% would need to be taken off the grocery tax. An additional option would be to just scrap the 58 million in non gas or diesel related tax and fee increases.
One final suggestion involves a newly proposed 70 million dollar Capital spending program in the budget. Instead of raising taxes on Tennesseans AND starting a new spending program, why not use those revenues to cut additional taxes to offset the amended gas tax plan? After all, we shouldn’t be a spend and tax and then spend some more legislature.
As always, I’m humbled and honored to be your representative.
With Liberty,
Rep. Bryan Terry
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