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Income Tax Debate Coda Finally Underway?

The constitutionality of governments in Tennessee levying taxes on income has been a matter of longstanding legal and political debate. That debate is set to continue for a while — but an official and unambiguous conclusion may in fact be on the horizon.

Those who thought the question was long ago settled as to whether state and local governments in Tennessee possess the legitimate power to levy taxes on income look to have thought wrong.

The state House of Representatives, following the Senate’s lead, recently backed a proposed amendment to the Tennessee Constitution specifically banning earnings taxes.

On a 73-17-3 vote, support for the measure handily surpassed the two-thirds majority, or 66 votes, needed in the House next session to trigger the statewide referendum. The Senate vote was 26-4 last spring, where 22 votes will be needed next session to achieve the two-thirds requirement.

So it appears that, in keeping with Tennessee’s grueling process for altering the state Constitution, there’s a good chance voters in 2014 may get an opportunity to impose a binding cease-fire in one of the most politically bloody and protracted skirmishes of the past two decades. They will be asked to endorse or reject proposed language to the Constitution declaring that state and local governments can’t tax a company’s payroll or an individual’s “earned personal income.”

But is a vote of the people on a constitutional amendment banning an income tax even necessary — let alone desirable?

There’s little current doubt where GOP lawmakers, who currently dominate both the Tennessee House and Senate, stand on the question of a state income tax’s merit as public policy.

Republicans happily attribute their party’s ascension to the legislative majority over the past several years at least in part to their unified hostility toward an income tax. Indeed, soon after last Thursday’s House vote, Tennessee Republican Party chairman Chris Devaney blasted away at “Tennessee Democrats (who) once again showed their liberal mindset by reinforcing their belief that government should not be restricted from dipping into your paycheck.”

Democrats are in fact still deeply divided on the key legal and political questions surrounding an income tax — although they fully concur in their resentment toward Republicans for continuing to exploit their ambivalence on the issue.

During the House vote, nine Democrats voted in favor of sending the income-tax ban amendment to the people, 17 against.

Democrats voting for the measure, Senate Joint Resolution 221, included Reps. Gary Odom and Craig Fitzhugh, the chamber’s past and present Democratic caucus leaders, respectively.

Voting against the “No State Income Tax” amendment were Jimmy Naifeh, D-Covington, and Charles Curtiss, D-Sparta. Tennessee’s House speaker for 18 years prior to 2009, Naifeh was, along with former Republican Gov. Don Sundquist, a leading proponent of enacting an income tax when it was last seriously considered from 1999 to 2002. Curtiss, formerly chairman of both the House Commerce and Fiscal Review Committees, supported an income tax as well.

But perhaps the most telling sign of the political frustration that grips the party with respect to the income-tax issue is that seven Democrats refused to cast a definitive vote for or against SJR221, which is sponsored by Sen. Brian Kelsey, R-Germantown, and Rep. Glen Casada, R-Franklin.

Knoxville Rep. Joe Armstrong, along with Reps. Janis Baird Sontany and Brenda Gilmore, both of Nashville, opted to finger the “Present Not Voting” button.

And in an apparent protest gesture against even having to publicly consider the income-tax amendment, four Democrats declined to press any button whatsoever. Even though they were present for the day’s chamber floor session, House Caucus Chairman Mike Turner, Nashville Rep. Sherry Jones and Chattanooga Reps. JoAnne Favors and Tommie Brown made no effort to participate in the SJR221 vote.

Turner later accused Republicans of using SJR221 as a “political ploy.” He suggested their true intentions are to attempt to capitalize on what they perceive as strong public opposition to an income tax and further marginalize the Democratic Party in the halls of Tennessee state government power.

Turner called the SJR221 income tax amendment “a gimmick to get people out” to vote. Another constitutional amendment approved for the 2014 ballot last year, Senate Joint Resolution 127, which would grant state lawmakers greater authority to regulate or perhaps even attempt to outlaw abortions, serves a similar purpose, he said.

“I think it’s clear in the Constitution that the income tax is already banned,” said Turner, an Old Hickory firefighter who came unexpectedly close to getting singed in his 2010 House district re-election bid against Goodlettsville bison rancher Charles Williamson.

“I thought that was playing politics,” Turner said of SJR221. “Therefore I chose not to vote for it.”

Rep. Jones had a similar beef with the income tax amendment.

“It was just a political thing for the Republicans — it was just crap,” she told TNReport. “We’ve been all through this. When we went through the income tax last time it was determined that it was unconstitutional.”

“I am not saying that an income tax is not a good thing,” Jones added.

One thing is currently certain, though, she continued: There’s clearly not enough popular buy-in among voters to enable politicians to sell an income tax now or in the foreseeable future.

Fault for the electorate’s present-day income-tax loathing, said Jones, can ultimately be traced back to the most visible Republican who kept pressing for it in the late 1990s and early 2000s — Gov. Sundquist. Jones complained that the Sundquist administration never really did the legwork necessary to educate the public about its purported benefits. “That gave people the opportunity to bash an income tax so that nobody would like it,” Jones said.

“Will we have an income tax in the future? Nobody knows,” she said. “You never know what is going to happen to your funding in government, so why cut out your options? If it is unconstitutional, what’s done is done. I just don’t know why we keep fighting about it all the time. We’ve been fighting about it for 10 years.”

But is an income tax really “banned” in the Tennessee Constitution?

That very issue was at the center of those polarizing tax-policy feuds of yesteryear. And nothing’s really officially happened since then to put the issue to rest — save the reverberating electoral echoes of those famous honking horns.

The consensus a decade ago among stalwart income tax-phobes and -freaks alike was that the state Constitution was silent on the matter — even if the state Supreme Court had in earlier times interpreted that silence to mean the Legislature possessed no authority to impose such a tax in absence of a constitutional amendment.

(Note of Clarification: In the comment section below, former Republican Party spokesman Bill Hobbs raises the point that many who opposed the income tax during the period when it was last seriously considered by the Tennessee Legislature argued that because the state Constitution does not explicitly authorize the Legislature to tax incomes, then such a levy is indeed prohibited.)

“It long has been the ‘conventional wisdom’ in Tennessee that a general Tennessee tax on personal income would be unconstitutional,” wrote Chattanooga Times Free Press associate publisher Lee Anderson, an unwavering income-tax opponent over the years. “But look carefully in the Tennessee Constitution, and you will find not a single word saying such a levy is unconstitutional — or that one would be constitutional.”

Those who believed that an income tax was fully constitutional included not just politicians and activists, but legal scholars and state attorneys general. They were always quick to argue that absent any prohibitory language in the Constitution, the Legislature had all the power it needed to move forward with an income tax or virtually any other revenue-generating option it favored.

In a January 2002 op-ed for the Memphis Commercial Appeal, Donald Polden, at the time the dean of the Cecil C. Humphreys School of Law at the University of Memphis, wrote, “If the words of the Constitution explicitly permit or forbid the action or policy taken by the legislature, then the legal controversy can be resolved decisively.”

“However, in many cases the language is not clear and the court must determine the meaning of the Constitution by resorting to other analysis – for example, the history of the constitutional provision or prior court cases,” continued Polden, who is now dean of the Santa Clara University School of Law in California.

Polden wrote that legislators shouldn’t really even concern themselves with the issue of an income tax’s constitutionality. The job of lawmakers is to write laws, and the job of testing those laws against the government’s guiding document is properly left to judges, he argued.

He furthermore suggested that by then in 2002 “many constitutional experts” had concluded that the Tennessee Supreme Court opinions most often cited as precluding the state Legislature’s ability to collect an income tax — Evans vs. McCabe in 1932 and Jack Cole Co. vs. MacFarland in 1960 — were “not authoritative and therefore are not binding.”

Polden said that at the end of the day Tennessee lawmakers’ arguments against an income tax which were based on constitutional grounds “lack merit and may reflect efforts to avoid responsible state fiscal policy-making.”

Interviewed after the House vote on SJR221 last week, Speaker Beth Harwell brushed off charges that Republicans keep pulling the income-tax trump-card out of their sleeves unfairly and out of turn.

“Members reflect the will of the people that elect them,” said Harwell, herself a veteran of the income tax wars. “And to many folks in the state of Tennessee it is important that we clarify and put in our Constitution, for sure, that an income tax is unconstitutional.”

4 replies on “Income Tax Debate Coda Finally Underway?”

The notion that the state constitution is silent on the matter of the income tax is false. Demonstrably false.

Article 11, Section 9, says, “The General Assembly shall not authorize any municipality to tax INCOMES, estates, or inheritances, or to impose any other tax NOT AUTHORIZED by Sections 28 or 29 of Article II of this Constitution.”

Article 2, Section 28-29, are what give the legislature the power to tax, and list what it may tax.

In the past, the state Supreme Court has ruled – three times, always unanimously – that the omission of income taxes from the list in Article 2, Sections 28-29 means that the legislature is not authorized to tax it.

Proponents of the income tax say the omission does not mean the legislature can’t tax it. They say the omission is permissive.

But the omission is restrictive, as Article 11, Section 9 CLEARLY STATES than an “income tax” is one of the kinds of taxes that is “NOT AUTHORIZED” by Article 2, Sections 28-29. In plain English, Article 11, Section 9, says the legislature can’t authorize local governments to tax things that the state government itself is not authorized to tax.

The income tax is explicitly mentioned as one of those unauthorized taxes.

This is a plain as 1+1=2.

The only reason the constitutional amendment is needed is because, despite three unanimous supreme court rulings and despite the plain and crystal clear language of Article 11, Section 9, there are still plenty of pro-income tax politicians, activists and attorneys who think they can still create one and get a state Supreme Court packed with Democrat judges to wink and nod approval and overturn past court rulings. through some slick legalese and word-play. A decade ago, the ruse was to define earning income as a “privilege” and then call the income tax a “privilege.”

As if working to earn a living was a government-granted privilege, not a human right.

So the proposed constitutional amendment will be unambiguous.

The language of Article 11, Section 9, should have been enough, but with the Tennessee Democratic Party having endorsed a state income tax, I guess we’ll have to go on step further and add in language so simple that third graders can understand it.

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