Tennesseans will see a phase out of the so-called death tax, elimination of the gift tax, and a reduction in the food tax.
According to state Reps. Eric Watson and Kevin Brooks, the budget saves an additional $200 million in anticipated revenues for the potential cost of the Affordable Care Act and future global economic uncertainty. Republicans successfully fought off Democratic attempts to spend the extra revenue on projects, stressing the need to be prudent in budgeting for the future.
“I proudly voted for the budget this year,” Brooks said. “While the stalemate in Washington has yet to produce one, Tennessee's leaders came together to craft a balanced budget that slashes spending by 2 percent while still providing millions in tax relief to all Tennesseans. This fiscally responsible plan will return tax dollars to their rightful owners and improve the economic outlook for Tennessee.”
Watson said, “We listened to the voters. They told us they wanted us to cut wasteful spending, limit the size of government, and lower taxes. We did that, and still fully funded priorities like education.”
“Unlike Washington,” Brooks said, “the Tennessee General Assembly must pass a balanced budget. We worked long hours with the governor and Senate to fund core programs, fund the BEP, cut our taxes, keep our commitments and even put away $50 million dollars in the Rainy Day Fund. This is a fiscally sound budget that lowers the size and scope of state government and accomplishes much of what our constituents asked for us to consider.
“It is important to listen to the voice of the people who send us to the State House in Nashville. Unlike D.C., we in your state Legislature are listening and responding with responsible, sensible savings and spending,” Brooks said.
The 2012-13 budget includes the first phase of the death tax elimination, which will be completed in 2016. Supporters argued the measure will not cost the state money, but will boost revenues. Tennessee is one of only two states in the Southeast with a death tax, which forces those affected to flee to nearby states. The full repeal will represent a $94.6 million tax cut.
Watson said the death tax breaks up family farms and small businesses, forcing families to make difficult decisions at 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.
Brooks said going hand-in-hand with death tax elimination is the complete elimination of the gift tax, which represents a $14.9 million tax cut. Tennessee and Connecticut are the only two states that impose a gift tax. Tennesseans are subject to it if more than $13,000 in cash or assets are gifted even to a family member. As families passed land, businesses, and homes down to future generations — Tennessee collected.
The Tennessee General Assembly also reduced the food tax from 5.5 percent to 5.25 percent. As food and gas prices continue to increase, the food tax cut will put money back in the pockets of hard working Tennesseans. Both Gov. Bill Haslam and legislative leaders have vowed to further cut the tax in the subsequent years.
As state leaders await the U.S. Supreme Court opinion on the federal health care takeover, the decision was made to refrain from spending $250 million in anticipated future revenue to curb the potential cost of the law. If the Supreme Court does not overturn the law, Tennessee could be expected to pay $1.5 billion over five years. Further, members of the Haslam administration stressed saving the money due to global uncertainty. Currently, Tennessee is faring better than most states because of prudent budgeting as indicated by the state's AAA+ bond rating. In addition $50 million is being restored to the state's Rainy Day Fund to boost it to a projected $356 million by June 30, 2013.
Legislative leaders prioritized spending and fully funded education, TennCare, and several crime initiatives. The budget also restores over $120 million of previous cuts to core services. The government should be lean and efficient, while providing the best services possible to Tennesseans.
The state's Basic Education Program, 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 more than $81 million, bringing the total appropriation to $3.8 billion.
Earlier in the year, Haslam announced his Public Safety Plan, which aims to address violent crime in Tennessee. Among the measures fully funded in the budget are laws addressing gang violence, prescription drug abuse, repeat domestic violence offenders, and synthetic drugs.