Governor Phil Bredesen wants to end the state’s sales tax cap on big purchases. He took that plan to business leaders in Murfreesboro Wednesday.
Governor Bredesen is proposing to permanently end the sales tax break that occurs after a purchase tops $3,200. The money is needed to fill a budget gap of more than $85 million. And it needs to be permanent, Bredesen says. He bristles at the discussion from within the state legislature to make up the shortfall with rainy day funds. He says that’s not sustainable.
“I’m not trying to draw a line in the sand. But the kind of things being talked about in the House right now is ‘let’s just make all these problems go away, diving into the reserves.’ I just think that would leave the next governor in a very difficult position.”
Bredesen made his case to the Rutherford County Chamber of Commerce. He says businesses, as they buy copiers and computers, will largely be the ones paying the additional tax.
Shane Reeves is co-owner of Reeves Sain pharmacies and also a member of the Rutherford County Chamber of Commerce. He bought an $8,000 copier last week. Under Bredesen’s proposal, he would have paid another $120. Reeves says that kind of cost would have to be absorbed.
“I’m not going to stand here and say it’s something I want to do. I’d say let’s find another way to deal with this before we hit the business community.”
Still, Reeves says he understands why the state is looking for help from businesses. He listened as Governor Phil Bredesen said the next best option is to cut pay to state workers by five percent.
“Cutting state salaries across the board, that is popular out there in the public right now, but it would do a lot of damage over the long term.”
Bredesen says state workers are suffering from years without raises.
However, when the governor opened the floor for questions, no one commented on his sales tax proposal. They wanted to ask about health care.
The state is using two numbers when referencing an expected shortfall in the current budget year. The more conservative estimate is $85 million. But projections are as high as $105 million when accounting for an anticipated shortfall in cigarette tax collections of $25 million.
Senate Speaker Ron Ramsey uses an even larger figure. He has a $150 million estimate for the shortfall. He’s opposed to a proposed tax on cable bills that he doesn’t expect to pass, thus leaving an even larger deficit.