The Big Lie Continues
The Tennessean's story today on Speaker Naifeh's proposal for a 4.5% income tax has this curious item buried deep in the story:

The State Funding Board, which consists of economists and others, will meet Monday to try to forecast how much revenue the volatile franchise and excise tax will produce and follow that up with another meeting a week or so later to come up with fresh estimates on collections from all revenue sources.

Why, it must be asked, is the State Funding Board having a special meeting to "forecast" revenue from only one of the state's 23 different tax sources? The sad answer appears to be that the State Funding Board, which is a political arm of the executive branch, is being used as a tool in the administration's ongoing strategy of deception in quest of an income tax.

There is no other reason for the Funding Board to have a special meeting April 22 to "try to forecast" revenue from the F&E tax. After all, the Department of Finance will issue hard numbers on F&E collections in early May. So why not wait three weeks?

Because the May numbers are likely to show a big increase in F&E collections compared to the last two months.

The administration knows this. It happened last year. And such an increase this year may well make the "shortfall" less dire, and undercut the "budget crisis" atmosphere the administration has created in hopes of tipping 51 House members and 17 Senators over the income tax cliff.

The campaign filing deadline for the upcoming legislative election is passed, but the May revenue numbers aren't out yet. Therein lies the administration's narrow window of political opportunity to finally succeed in its four-year quest to create an unconstitutional income tax.

Why is the May revenue report so important? Because of the way F&E taxes are collected.

In early March, Finance Commissioner Warren Neel released the revenue data for February. Now, it showed actual revenue growth from 19 of the state's 23 taxes, but Neel focused solely on F&E taxes and noted a substantial decline. But what Neel didn't admit is, F&E taxes are paid quarterly and must be paid by the 15th day of the fourth month after the end of a company's fiscal year. And according to the Tennessee Department of State, most Tennessee businesses use the calendar year as their fiscal year. That means very few businesses actually owe the tax to the state until April 15. And those collections won't be counted and announced until early May.

At the tail end of a recession, it's not surprising that business owners aren't rushing to send checks to the state two months before they are due.

Incidentally, this isn't the first time Neel, a cheerleader for the income tax, has misrepresented F&E data to support the administration's claim of a revenue crisis.

In April 2001, Neel announced the monthly revenue totals by highlighting a $98 million decline in franchise tax revenues. April reports detail revenue collected in March. But Neel, as he did again this year, failed to mention that most Tennessee companies don't have to pay the tax until mid-April.

No other media caught the spin, but I did, while working for the Tennessee Institute for Public Policy. I wrote a press release, which was published several places including as a commentary on Chattanoogan.com, which revealed Neel's deceptive tactic and predicted that, when the April F&E revenue was counted and reported in early May, F&E taxes would rebound.

I predicted: "Franchise tax revenues likely will rebound strongly in April as Tennessee businesses meet the April 15 deadline - but that revenue won’t be tallied and reported to the General Assembly and the general public until mid-May."

Sure enough, that is exactly what happened. Franchise and excise tax collections in April 2001 soared to $93 million more than the budgeted estimate for that month, erasing the previous month's F&E 'shortfall' and boosting overall revenues to a $69.5 million surplus over the "budgeted estimate" for revenues that month. You can see my comments on that development in another piece I wrote, also published by Chattanoogan.com.

How did Neel respond to that good news? He called it bad news. In his May 16 press release reporting the revenue numbers, Neel claimed the state still faced a large deficit "excluding franchise and excise tax collections." Funny - a month earlier, he had been claiming that declining F&E revenue was a reason the state needed to pass an income tax.

It is reminiscent of how Neel has either spotlighted or excluded sales tax revenue from vehicle sales depending on whether it is up or down. To Neel and his boss, good revenue is bad news but bad revenue is good news because it makes it a little easier to pass an income tax.

Which brings us full circle to now, and this strange meeting of the State Funding Board that will look solely at the F&E revenue.

A year ago, as reality exposed the deceptive shenanigans of Warren Neel, I suggested it was "time for the Department of Finance and Administration to stop playing games" because "good public policy can not be build on a foundation of bad information.”

Unfortunately, this strange and unnecessary meeting of the State Funding Board tells you that Neel and his boss haven't stopped playing games. Their Big Lie strategy continues.

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For more on how Warren Neel and the Sundquist administration spin the revenue numbers to create a sense of crisis, scroll down to read past articles and commentaries.