Surging Tax Revenue
According to this report from the state Department of Revenue, total tax collections in the state of Tennessee surged 9.2 percent in July - shortly after the legislature ended the budget stalemate. Franchise & Excise taxes, which had mysteriously dropped in the last months of the 2000-02 fiscal year, rose 55% and 554% respectively in July compared to July 2001, leading some analysts to question whether the Sundquist administration under-reported May and June revenue in order to make the budget shortfall look worse and increase pressure for passage of an income tax to solve a budget "crisis." That kind of political gamesmanship could explain such large increases in July revenue.

Incidentally, sales tax revenue rose 2.07% in July compared to July '01. That's strong growth compared to the 0.2% growth in the just-finished fiscal year. Part of the growth is due to the increase in the sales tax, which went into effect in mid-July, but the rebounding economy also played a role. You can expect very rapid growth in the sales tax as the economy improves - and Tennessee may well end this fiscal year with a sizable surplus.