By Joe White and Skip Cauthorn (The Nashville City Paper)
State Sen. David Fowler Tuesday proposed a new either/or tax that would require a referendum to go into effect.
Voters in November would be asked to choose between a one percent increase in state sales tax rate and a constitutional convention, or a flat-rate 3.25 percent income tax.
The Chattanooga Republican told the Senate Finance Committee that either plan would raise about $1 billion.
The flat-rate income tax would be accompanied by some level of sales tax reduction on food.
Senate Finance delayed any decision until at least next week. Fowler’s background material lacked several definitive figures, including the amount of reduction in the sales tax on food.
Under Fowler’s plan a sales tax would go into effect July 1 to fund the 2002-03 fiscal year budget.
Nov. 2 voters would choose whether to continue the sales tax or scrap it and start a flat-rate income tax on Jan. 1.
Under this plan, as under several others, the current shortfall would be funded out of reserve funds.
The plan is an intricate dance of if/when situations:
1: If the constitutional convention is disapproved, the 3.25 percent income tax solution would go into effect January of 2003. There would be a reduction of the sales tax, local option sales taxes would be removed and a statewide uniform rate would take effect. 2: If the constitutional convention is approved Nov. 2, then the sales tax reform plan (details of which are still unknown) would go into effect Jan. 1, 2003. The convention delegation would be elected in 2004.
3: Delegates would be responsible for devising an alternative to the sales tax reform plan in September of 2004.
4: The convention proposal for tax reform would then go back before voters.
5: If voters approve a convention proposal, final approval could either be done by the legislature or the tax system in place at that time would remain.
Fowler accused anti- and pro- income taxers of “playing chicken” and said his plan would bypass the stymied legislature to let voters decide how to tax themselves.
Support for the plan, said Fowler, was unknown.
“I don’t know what the House will do; I wasn’t elected to the House. Do I have support? I don’t know,” he said. “This is not my thing of choice. Some will think I have lost my conservative principles … I assure you I have not.”
Income tax proponent Bob Rochelle, whose stance is usually opposite of Fowler’s, said leaders should look at the plan.
“It’s something I think we ought to be interested in,” he said. “I compliment you for giving this consideration.”