Tennessee governor presents compromise to end stalemate

Tuesday, July 2, 2002

Associated Press WriterNASHVILLE, Tenn. (AP) -- Tennessee Gov. Don Sundquist proposed a compromise plan Tuesday to help resolve the budget stalemate over taxes and end the partial government shutdown.

"If there was ever a time for compromise it's now. We need to reach a conclusion by Wednesday. If not, we should work around the clock if we have to," the governor said in a news conference.

The gridlock over an income tax, which has plagued the Legislature for four years, came to head Sunday when proponents and opponents refused to give in and lawmakers failed to meet their constitutional duty of passing a balanced budget by the new fiscal year.

The result was a partial government shutdown that put half of the state's 42,000 workers on unpaid furlough and only essential services operating, such as prisons and mental health institutions.

The state must resolve an $800 million deficit in the budget, either through raising or creating taxes, or deep cuts in services.

Sundquist said his plan borrows from each of the budget proposals most popular with lawmakers, but stressed it was not a finished document. He said it was to get action going on a compromise.

His proposal would raise $950 million to $1.1 billion by:

-- Expanding the sales tax and franchise tax, and increasing the taxes on professionals, tobacco and alcohol;

-- Raising the 6 percent sales tax to 7 percent from Aug. 1 to Dec. 31, and creating a 1 percent flat rate income tax effective Jan. 1.

-- Proposing a constitutional convention for the August ballot. If voters approve it, delegates would be elected in 2004 and would make recommendations to the Legislature. If voters decided against a constitutional convention, then the income tax rate would increase to 3.5 percent on Jan. 1, 2005.

"This a plan that will work," Sundquist said.

Sundquist presented the plan to the legislative leadership after calling an emergency meeting. The House and Senate planned to resume their sessions Tuesday afternoon.

Plans to raise the sales tax and to create an income tax each have the support of at least 40 members in the 99-member House, where it takes 50 votes to pass a bill.

Speaker John Wilder told the 33-member Senate earlier in the day that they should pass whatever revenue bill the House passes.

"I know there are not 17 votes in the senate for an income tax, but I know something else; whatever they send us we will pass it, an income tax, we will pass it," he said.

Sundquist said compromise didn't mean defeat, it was the "art of the possible."

"There's not a majority for one thing," he said. "The truth is that everyone is going to have to give a little.

"We can give the people of Tennessee our best. Let's get on with it."

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