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Tenn. Governor Vetoes Budget

June 27, 2000

NASHVILLE, Tenn. (AP) _ Gov. Don Sundquist on Tuesday vetoed an $18.3 billion budget that did not contain the state income tax he wanted.

The veto came just four days before start of the new fiscal year; without a budget, state government could be forced to shut down.

Tennessee levies a tax on interest and dividends, but not on wages.

The Republican governor has pushed for tax reform since last year and called two special sessions, saying a 3.75 percent tax on wages is needed to increase money for education and health care and keep Tennessee ``from becoming a second-rate state.″

He has said that an income tax is the most equitable approach but that he is willing to consider other means of tax reform.

However, the Legislature, in approving a spending plan, did not take up tax reform at all. Instead, it used one-time money for recurring expenses and raised state revenue estimates based on the booming economy.

``The budget before me today is irresponsible and shortsighted,″ Sundquist said. ``It’s a fudge-it budget that fudges on the one thing that I would think we could all agree on, and that’s the future of our children.″

All House members are up for re-election, and most voters do not support an income tax.

The House was expected to override the veto later Tuesday. A Senate vote was possible Wednesday.

Failing an override, a temporary budget could be passed to keep some state services funded past Saturday, the start of the fiscal year.

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.

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

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