Income-Tax Supporters Pan Proposal to Constitutionally Ban Possibility of Enacting One

Press Release from Tennesseans for Fair Taxation, March 9, 2011:

Facing a $1 billion revenue crisis, Tennessee Senate votes to limit state’s revenue options. TFT calls for revenue with justice for all Tennesseans.

Negative reaction today to the state Senate’s passage of a proposed constitutional amendment to ban an income tax is swift and sharp. In a 28-5 vote, the Senate voted to approve SJR 18, introduced by Sen. Brian Kelsey (R- Germantown). “This vote is illogical. To propose a perpetual limit on our revenue options a week before the Governor delivers a state budget with a deficit of $1 billion is not smart,” says Tennesseans for Fair Taxation member Jim Von Bramer of Johnson City, Tenn.

The resolution, if ultimately passed, would forever require Tennesseans with the least income to pay the most in state taxes. TFT has long advocated a system of taxation that requires those with the greatest ability to pay and who benefits most from our government to pay more of the cost of government. The sales tax eats up almost 12% of low-income families’ total income. On the other hand, those earning an average of $215,000 annually pay only 4.5% of their abundant income in state taxes, according to a November 2009 report, “Who Pays?”, by the Institute on Taxation and Economic Policy.

This unequal treatment tends to trap people in poverty and deny opportunity for success. It is our excessive reliance on sales and other consumption taxes that causes the imbalance. “Tennessee needs revenue with justice for all. The resolution before you today, if carried to completion, would prevent Tennessee from ever having a just tax system,” says Brian Paddock, a Jackson County attorney and TFT board member. “It is another attack by the ‘haves’ on the ‘have-nots’ and ‘have-lesses’”.

A broad-based income tax could be structured in such a way to raise an additional $1 billion in revenue while still giving more than two-thirds of Tennesseans a tax cut through generous exemptions, eliminating the tax on groceries, and reducing the general sales tax. Instead, this resolution would limit even further the share wealthy Tennesseans’ contribute to the cost of government and would prevent Tennessee from ever having a just tax system that could truly address the revenue needs of our state.

“It is irresponsible to slam the door on a tax cut for 76% of Tennesseans. The amendment to forbid any future legislature from adopting an income tax means we will have the nation’s highest sales tax far into the future,” says Brian Paddock, a Jackson County attorney and TFT board member. “We could never get rid of the sales tax on food. The only route to more revenue would be to increase the food tax, or start taxing services. We can close some tax loopholes, but Tennesseans want a tax system that does not come with a budget shortfall crisis, year after year, in good times and bad.”

“Permanently blocking an income tax lets the wealthiest Tennesseans walk away

from paying a fair share of state and local taxes forever while the rest of

us pay much more of our income on food taxes and the basic necessities we buy from our local retailers,” adds Von Bramer. “Our state budget gap will likely only grow as the federal budget shrinks. We are headed into a dark place, and now the state Senate says we should throw away our flashlight.”

Tennessee’s short-sighted overreliance on the sales tax as its primary source of income has already led to layoffs, program cuts, and exponentially rising college tuition costs due to revenue shortfalls — and this is the foreseeable future for Tennessee if the resolution’s measures ultimately succeed. The Senate’s vote today not only would ban an income tax in Tennessee, it would ban all hopes for a better economic future in the state. “Every candidate says they are for children and education, but children and education will be the most injured by the ‘cut only’ policy that is being pushed by the current administration. We need more revenue, not budget cuts!” says Katie Findley, a University of Tennessee-Knoxville student who says her college tuition has risen exponentially each year due to state budget cuts.

The Tennessee Constitution is currently silent on the question of whether the state has the power to levy a tax based on income other than dividends and interest. SJR0018 states unequivocally that the state does not have that power. The framers of Tennessee’s Constitution chose their words carefully. Respect for the Constitution demands that any amendment to it be made with the utmost caution.

“Poll after poll shows more than half of all Tennesseans support an income tax if it is combined with ending the food tax and cutting the general sales tax while bringing in enough revenue to stay competitive with other states,” says Dr. Patrick Reagan of Cookeville, Tenn. “It makes no sense to amend the state Constitution so that a cut in food and sales taxes can never be considered. This is a distrust of future voters and legislators to do what they think is best for our state.”

The process of amending the Constitution takes a minimum of two-and-a-half years. If this resolution ultimately results in a Constitutional amendment, it would take at least another four years for voters to demand its effects be reversed – effects which could prove disastrous for a state whose long-term trend has already been toward declining revenue and chronic budget shortfalls. Now more than ever, Tennessee needs revenue with justice for all.