Tennessee Legislature overrides veto of budget; Governor had demanded unpopular income tax


NASHVILLE, Tenn. - Averting a government shutdown, the Legislature overrode Gov. Don Sundquist's veto and enacted an $18.3 billion budget yesterday without the state income tax he had demanded.

The state had risked a full or partial shutdown Saturday because the state Constitution requires a new budget by July 1.

Sundquist, who had demanded creation of an income tax to support education and health, vetoed the spending plan Tuesday.

The House promptly overrode his veto, 78-19. The Senate did the same yesterday in a 20-9 vote.

Tennessee is one of nine states without a broad-based income tax. The state taxes interest and dividends but not wages.

The Republican governor had pushed for a change in the tax structure since last year and called two special sessions, saying a 3.75 percent tax on wages was needed to keep Tennessee from becoming "a second-rate state."

Instead, the Legislature used one-time money for recurring expenses and raised state revenue estimates based on the booming economy.

All 99 House members and 16 of 33 senators are up for re-election, and many voters oppose an income tax.

"I asked the members of this General Assembly to consider what kind of state we want Tennessee to be in 10, 20, 50 years," Sundquist said Tuesday.

"Judging from the budget before me today, the majority in this General Assembly answered that question by saying it wants a state that continues to lag behind the rest of the country."

House Majority Leader Jere Hargrove, one of the budget's sponsors, said: "We heard our constituents say make responsible cuts, and we did. We heard people tell us to live within the available dollars, and to the extent we could, we did."

The governor has argued that Tennessee is too dependent on sales taxes, which account for 57 cents of every state tax dollar.

In return for an income tax, Sundquist had proposed exempting food from the state's 6 percent sales tax, dropping the tax on interest and dividends, and reducing the overall sales tax to 3.75 percent.

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