Revenue commissioner talks tough on tax laws

December 13, 2005
MT JULIET - The Tennessee commissioner of revenue said Monday that despite "amazing growth" in sales tax revenue last year, Tennessee must buckle down on enforcing its tax laws if it wants to remain competitive among its sister states, especially those with income taxes and lower sales tax rates.
"There is projection that in a three- to four-year time frame the sales tax is not going to experience as much growth as it is now," Department of Revenue Commissioner Loren L. Chumley told the Mt. Juliet Rotary Club on Monday. "But what they (some economists) are predicting is a greater growth in personal income tax, so what will end up happening at that point in time is that states that rely on personal income tax are going to find themselves in probably a stronger fiscal position than states that do not."
But Chumley said those trends flip all the time, and she reiterated Gov. Phil Bredesen has no plans to propose a state income tax.
"We are committed to continuing on the path that we've got of trying to shore up the compliance initiatives, shore up the loopholes that we've got out there," Chumley said. "The governor's not going to propose a state income tax."
Bredesen was scheduled to appear at Mt. Juliet Rotary Club to announce his 2006 agenda, but a family emergency required him to to return to his native New York.
Pinch hitting for the governor, Chumley discussed the administration's efforts to reign in "under compliance" with sales tax laws, more stringently enforce sales taxes on electronic commerce and use tax incentives to continue to attract businesses to the state.
Chumley said after three difficult years, the state's revenues are beginning to pick up.
"We made some difficult choices in that first year," Chumley said of Bredesen's efforts to balance the state budget. "The good news is that right now revenues are picking up. Our sales taxes are about 7 percent over where they were this time last fiscal year."
Chumley added revenue figures are still below the department's estimate for this year, which she attributed to revenue lost from interstate and electronic commerce.
"Some of the things we always have to worry about in Tennessee with our sales taxes is that we have eight border states all with lower sales tax rates," Chumley said.
Being sales tax reliant also makes Tennessee more susceptible to revenues lost by purchases made over the Internet that go untaxed, which is something enforcement of the "fair use tax" can help remedy, Chumley said.
"With that 24/7 availability of the Internet, we do find ourselves increasingly vulnerable to a loss of revenue," the commissioner said. "What this (fair use) tax is trying to do is put our Tennessee merchants on a level playing field with those merchants who are outside the State of Tennessee."
In addition to a jump in sales tax receipts, Chumley pointed enthusiastically to a 28.8-percent increase in revenue generated from franchise and excise taxes, which she said are basically corporate income taxes.
"This tax is going like gangbusters," she said.
Yet she cautioned about relying on the revenues over the long term. Not only are they "volatile and vulnerable" taxes, franchise and excise taxes make up 12 percent of the state's total tax receipts, Chumley explained. Sales taxes, in comparison, constitute 60 percent of receipts.
Business development and sales tax revenue are important issues for Wilson County, which is one of the fastest-growing counties in the state.
Compared to last year, Mt. Juliet's sales tax receipts are up 35 percent, Mt. Juliet City Planner Bobby Franklin said last week.
Although she did not specifically mention Wilson County, Chumley highlighted the governor's overall business development initiatives, including recent efforts to bring the corporate headquarters of Nissan to Nashville, which will do wonders to grow the tax base throughout the state, she said.
"Job creation has been a major part of his (Bredesen's economic) package," Chumley said. "He wants us to work with the Department of Economic and Community Development in ensuring that Tennessee provides a favorable climate for businesses to grow and to locate."
Staff Writer Jared Allen can be reached at 444-3952 ext. 15 or by e-mail at jared.allen@lebanondemocrat.com.