Majority Whip Johnny Garrett joined the newsmaker line on Monday’s episode of The Tennessee Star Report with Michael Patrick Leahy to share his insights on the new legislative session as it begins its second week at home as snow continues to blanket the region.
Garrett expressed optimism about Governor Bill Lee’s proposed education freedom scholarships, though he said he does anticipate some opposition to the proposal.
The conversation then turned to the potential constitutional issue regarding the franchise excise tax law that could leave taxpayers on the hook for as much as $1.2 billion. Garrett noted Attorney General Jonathan Skrmetti is evaluating the claims to see if tax relief for the companies in question would address constitutional concerns.
TRANSCRIPT
Michael Patrick Leahy: And welcome to The Tennessee Star Report. It is 12:05 p.m. We are broadcasting live from our studios on Music Row here in Nashville.
And we welcome to our newsmaker line right now our very good friend Johnny Garrett, State Representative Johnny Garrett from Goodlettsville, who is also the Majority Whip in the Tennessee House of Representatives.
Good afternoon, Johnny.
Johnny Garrett: Good afternoon on this snowy day we have here.
Michael Patrick Leahy: We were going to have you here in-studio, but discretion being the better part of valor, we thought it would be a good idea to avoid getting stuck in a snowbank or in a parking lot as I did this morning, but I don’t know.
Johnny Garrett: Well, thank goodness for modern technology where we can do this over the phone, right?
Michael Patrick Leahy: Exactly. So the Tennessee General Assembly convened. On last Tuesday, lots of agenda items. What do you think? How is it shaping up?
Johnny Garrett: Oh, I think it’s gonna be shaped up very well. We’re gonna do a lot of good things for Tennesseans, and I’m looking forward to getting back to work, and we will be closed tomorrow for snow purposes because we’ve got those coming in from all across the state.
And from what I understand, I mean, this is hitting the entire state and continuing to do so. And so it’s going to be a great session, I think.
Michael Patrick Leahy: So you’ll be back in session probably Wednesday. That’s wise because we’re like 14 degrees right now. It’s continuing to snow here in Nashville, and I don’t think it’s going to get any warmer tomorrow.
The high is supposed to be about 22 below three degrees. So yeah. The weather conditions of today are probably going to continue into tomorrow. Of course, you know what Mark Twain said. You know, we’re safe as long as long as the legislature is not in session, right?
Johnny Garrett: That’s right. But hopefully, that’ll carve out and not apply to the State of Tennessee because of what we’ve been able to accomplish since the Republicans and conservatives have had a supermajority since 2010.
Michael Patrick Leahy: Yeah, I agree, and of course, the big issue, I think, is Governor Bill Lee’s outlined proposal for education freedom scholarships of about $7,000 in year one. And it’ll be, I guess, 20,000 kids out of a million K-12 public school students here in Tennessee.
Year one, it’s like, I think, half of them are low income, and half of them are general population.
And then it opens up to the general population. When do you think the governor is going to present the full details of that bill to the Tennessee General Assembly?
Johnny Garrett: Well, I’ll tell you, it’ll has to be before January 31st, since that’s the bill filing deadline that we all have. So, you know, over the next week or two we will have a better understanding of what the details are relating to the education saving scholarship that he’s proposing.
So we will know, we will know those details here in the next you know, week or two, as I expect.
Michael Patrick Leahy: Do you anticipate significant opposition anywhere to the broad themes he’s identified?
Johnny Garrett: I anticipate there will be some pushback. I’ll anticipate from both sides, right? I mean, I think obviously Democrats are going to oppose it just because they believe in one solution fits all, right?
I mean, anything we approach, whether it’s in your business life, personal life, or your political life, I don’t believe there’s one solution to everything, right? And so there will be some, I think there’ll be lots of folks from the Republican side that will want to see those details. And how that will affect their community, especially those in our rural side of Tennessee.
What does it look like? And I think it’s important that those details will be out as soon as possible so people can, can really take this back to their districts and see what their constituents want to see to make sure that our parents are in more control of how their kids are educated. And I think right now that, you know, the choice is first by your zip code, right?
Wherever you live dictates where your child goes to school. And I’m a proponent of this because I do believe the parents need more of a more of a choice in that. And they may need some assistance.
Michael Patrick Leahy: Now, just about a week ago. This curveball because you’re a baseball guy, right? I’m not even sure. Oh, yeah I don’t know if this is a curveball or a spitball or a knuckleball – but it came it came sailing into the Tennessee General Assembly with this apparent constitutional flaw in the franchise excise tax law a law that was passed in the 1930s.
Now, here’s my understanding of it: that law is likely, I’m told, unconstitutional, and it is a potential lawsuit – hasn’t been filed yet – but we’ve been made aware of that 70 or 80 out-of-state companies have, with clever attorneys, brought to the attention of officials here in Tennessee that the franchise excise tax, which I think has a higher minimum payment for out-of-state companies than it does for in-state companies. That is, companies based out-of-state that conduct business here.
We had State Senator Joey Hensley in here the other day said, you know, look, this could be as much as $400 million a year. We could, in theory, owe back to three years. They can’t go all the way back to 1930s, but $400 million times three years would be back pay $2 billion. And then going forward, it’s a $400 million gap.
Can you enlighten us as to what’s going on with this?
Johnny Garrett: Yes, I think there has been some discussion on some companies that, and you summarized it quite well, that believe there may be some issue on collecting taxes from in-state companies versus out-of-state companies, and that could potentially be a violation of our United States Commerce Clause and the Equal Protection Clause under the U.S. Constitution.
So, I believe what the attorney general is doing is weighing the cost-benefit of do we provide and update the franchise and excise tax that’s collected now going forward and provide those companies with tax relief, which would also provide, I believe if I understand it, tax relief for all folks that enter, you know, that conduct commerce inside the State of Tennessee.
Rather than there be this lawsuit file that we have this, you know, huge thing to defend all the way back from 1932, where I believe Senator Hensley is correct. There’s only a certain amount they can go back and try to collect.
So I think that’s what the AG’s office, the governor’s office, is weighing. And I don’t believe we know all those details yet, but I’ll be looking forward to looking at that both from my, you know, legal perspective as a lawyer. And then also, what is it gonna cost the state going forward to do this? Well, the benefits to all of our companies outweigh the potential liability that the state could have if, indeed, this particular provision could have some constitutional questions.
And I’m gonna be honest with you, Michael. I mean, I’m not totally aware of what those questions are. I’ll be looking forward to learn more about that as it travels through the system over the next weeks and months.
Michael Patrick Leahy: So your understanding is the constitutionality question has to do with the United States Constitution and not the Tennessee State Constitution.
Johnny Garrett: I think it may imply both because they’re very similar, but since it involves out-of-state companies that transact business inside the state, that’s going to trigger what we know as the Commerce Clause. And we can’t do one thing for those in the state versus what we do with those that are in the state that interact with the state.
And that, I believe, is what the AG’s office is taking a look at to make sure we’re in compliance – which is what he should do, right? But I don’t want it to do, I don’t want the fear or the threat of litigation to weigh or influence the decision we make on whether or not we give a tax break to those–
It’s all got to make sense. We all got to weigh what the potential liability we have as a state versus what those tax breaks would be. And I believe that’s what the governor is doing with his team to weigh those benefits versus the potential liability if, indeed, the Commerce Clause could be an issue here for however, they calculate the excess tax package since 1932.
Michael Patrick Leahy: Last question, super majority of Republicans in the Tennessee House, the Democrats have been sort of led by a very lively group. How do you anticipate the Democrats and Republicans getting along in this session?
Johnny Garrett: Well, look, most of the legislation we pass down there is on a bipartisan basis. And I think that the Democrats need to choose whether or not they want to follow their leaders that I would call them now. Not their leader that’s been elected and not their caucus chairman that’s been elected by their caucus – but two or three or four folks that all they want to do down there is scream and yell and cause disruption.
And not actually effectively represent their interests.
Michael Patrick Leahy: They seem to be screaming and yelling, but not to very much effect so far.
Johnny Garrett: No, they haven’t done anything. They haven’t introduced a bill. They haven’t asked even to let us know if there’re ideas.
Michael Patrick Leahy: Details, details.
Johnny Garrett: That’s right.
Michael Patrick Leahy: State Representative Johnny Garrett, Majority Whip in the Tennessee House. Thanks so much for joining us today. And when the weather gets better, come on in studio with us.
Johnny Garrett: I would love to. Thank you very much for having me.
Michael Patrick Leahy: Alright. Always great to have you on. Okay, we’ll have more when we get back.
This is The Tennessee Star Report. I’m Michael Patrick Leahy.
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Photo “Johnny Garrett” by State Representative Johnny C. Garrett.
