frank_talk (2006-21)

Stop the Insanity

Here we go again, spending surpluses, not giving them back

by Frank Cagle

There are those who say the definition of insanity is doing the same thing over and over again, expecting a different result. Coming off two weeks on the road with a laptop, I can only observe that those people have never had dial-up Internet service.

But in most cases it is foolish to ignore the lessons of history.

During the 1990s, revenues poured in to the state of Tennessee. Revenue exceeded inflation and population growth. The governor and the Legislature spent it. Then we had a recession. Suddenly revenues dipped, and it became received wisdom that we have a faulty tax structure and we needed tax reform, i.e. an income tax.

There was outrage when the General Assembly, in 2002, raised the sales tax instead. Raising the sales tax was an onerous burden on the poor. It raised the price of groceries. It made our border communities less competitive with other states. The sales-tax increase was reviled by progressives everywhere.

Where is the outrage now?

The first year it took some time to get the new revenue, and incoming Gov. Phil Bredesen made some budget cuts. But the recession ended and the new revenue came on line. The next year we had a $95 million surplus. Last year we had a $272 million surplus. This year the Bredesen administration is projecting a $266 million surplus, and it may be more. That’s money in excess of budgets that increased each of the last three years. Keep in mind that since the surpluses were spent, becoming part of the budget, the latest surpluses are surpluses on the surpluses. In other words, we are now at a point where the total surpluses are at $633 million. (Some of this is also from increases in corporate taxes as a result of a good economy.)

Where is the cry to repeal the sales tax increase? If it was so bad then, why isn’t it still bad? If it was so deleterious to our economy and our poor people then, why isn’t it terrible now?

This is a pattern we have seen over and over for the last 20 years. A recession forces a sales tax increase. The money pours in. The money gets spent. Then we have another recession and suddenly our tax structure is faulty, we need tax reform, we need a state income tax. Yes, we’ve put some money in the Rainy Day Fund. That’s usually enough to get through one year of budget shortfalls. But recessions usually last a couple of years. So when the next one hits, we will again hear that our tax structure is flawed and we need a state income tax and that we cannot break the “10 percent” sales-tax barrier.

Republicans do have a proposal to use some of the surplus to reduce the sales tax on groceries, and it may come up for a vote this week. But while it might have ballot-box appeal, it is the wrong approach. Reduce the overall sales tax so we have a cushion for the next recession. We can then put it back.

If you start separating grocery sales taxes from other sales taxes you start using the sales tax code for social policy. It’s why the federal income tax code is a nightmare. You are creating a culture where interest groups will be around every year suggesting that this group get a sales-tax decrease and that group should get an increase. Not to mention the accounting nightmare you are creating for everyone from chain grocery stores to Mom and Pop operations.

If you continue to keep the increased sales-tax revenue, and you continue to commit all the increase in sales tax to budget items, your alternatives during the next recession will be massive layoffs, service cuts or another increase in taxes.

Talk about insanity.

My father has always had absolute faith in God, the Crimson Tide and the Democratic Party. Those last two have given him fits in recent years, but the Lord called him home last week, a day after his 86th birthday. He was a true patriarch. As his weak heart finally succumbed to Parkinson’s and diabetes, his bed was surrounded by his wife of 64 years, his children, grandchildren, great-grandchildren and all his brothers and sisters.

I’ve never been one to believe that angels walk among us, except I’ve met a few lately. Home hospice care requires a special kind of person. You have to be optimistic and upbeat, but still be honest and straightforward with your patient. You have to comfort the family, yet prepare them for what is about to happen. Give them comfort, but no false hope.

People my age have been called Baby Boomers, but they are beginning to call some of us the Sandwich generation: caught between caring for our children and our aging parents. It is stressful in the extreme.

Should your time come to go through this, I just hope you have someone like Amber, Vanessa, Kim or Barbara around to help you through it.

Frank Cagle is a political analyst and the editor of Knoxville Magazine . You can reach him at frank@frankcagle.com .