Good Tax, Not a Solution

Tobacco no substitute for income as a tax source

  

      

The final kicker in this package of tax improvements is the additional $605 million of annual revenue that will be generated to invest in any combination of urgent state needs, such as TennCare and pre-K education. With this package of improvements, Bredesen's good ideas for lifting the state off the bottom suddenly get real.

 

 

 

In his Insights Column supporting an increase in Tennessee's cigarette tax (March 17), Joe Sullivan correctly targets the central reality that dominates the current state of affairs in the Volunteer State: we simply lack the revenue needed for Gov. Bredesen to fix TennCare, extend pre-K classes to a growing number of Tennessee children, and transform the University of Tennessee, among other urgent needs. The dollars for these worthy plans aren't there and won't be there.

Sullivan presciently observes: "Bredesen's 'living within our means' maxim is turning ever more so into a prescription for living in mediocrity as a state."  

However, a higher cigarette tax is a pitiful solution. It generates only about one-third of the additional revenue Bredesen needs, and, as the price of cigarettes goes up, fewer people buy cigarettes and even that tax revenue slips away. If you consider high cigarette taxes as a health initiative meant to discourage smoking, that's fine. But don't confuse it with a serious plan to fix Tennessee's perpetual revenue problems.      

To make matters worse, Sullivan, in a single sentence, then dismisses the one strategy that can, over time, lift us out of our persistent mediocre state. He writes: "I regretfully concede that Bredesen, along with every other politician in the state, is right in concluding that a state income tax is a non-starter." That's it, according to Joe. Just forget it.

Where to begin? Let's identify one overarching reality. In my opinion, the main reason why Tennessee's political leaders persist in declaring any revenue solution that includes an income tax to be a "non-starter" simply is that Tennessee's political leaders persist in that declaration. It's that way because it's that way.

Nobody is talking about adding an income tax on top of all the terrible regressive taxes we already have. No, the income tax is part of a package of improvements that will produce a tax cut for four out of five Tennesseans. How can that be? By enacting:

• A 100% elimination of the state and local tax on grocery food;

• A 43% cut in the state sales tax (currently the highest in the nation), reducing it from 7% to 4%;

• A 100% elimination of the existing tax on dividend and interest income; and

• A broad-based graduated income tax with generous personal exemptions. (For example, the first $30,000 of income for a married couple would be exempt from all income tax.)

The final kicker in this package of tax improvements is the additional $605 million of annual revenue that will be generated to invest in any combination of urgent state needs, such as TennCare and pre-K education. With this package of improvements, Bredesen's good ideas for lifting the state off the bottom suddenly get real.

These improvements are the heart of "The Tennessee Investment & Economic Development Act" (H.B.2120), introduced by Rep. Mike Kernell (D., Memphis).

There is a long list of other benefits that automatically will flow from such a package of tax improvements. The 43% cut in the state sales tax will, overnight, put an end to the cross-border shopping that presently drains tens of millions of dollars of tax revenue from Tennessee's treasury.

We'll also put a dent in mail order and Internet sales that increasingly lose us millions more in tax revenue.

No longer will we subsidize our neighboring states by providing jobs for cross-border wage earners where, instead of paying Tennessee for maintaining the infrastructure that supports their jobs, they pay income taxes to their home states that do nothing whatsoever to make those jobs possible. Tennesseans are proud to be generous people, but this arrangement is downright stupid.

And, of course, we'll no longer forego the $800 million or so in Federal tax deductions that would be available to those Tennesseans who itemize their deductions. These are just samples of good things that will happen. 

All of this, to be sure, takes political courage. The conventional nonsense tells us that nobody out there supports an income tax.  Wrong again. Middle Tennessee State University's Survey Group has reported since Fall 2002 that majorities of 60% or more support a tax system where sales taxes are cut and an income tax is offset with generous personal exemptions (just as Kernell's legislation does).  Those politicians who claim no public support for a balanced package of tax improvements simply ignore this consistent and powerful finding by the highly respected MTSU Survey Group.

Why does such an intelligent writer as Joe Sullivan fall for the same line? Isn't it time for the leaders of this state to speak to us truthfully and courageously? All they have going for them are a tax cut for most Tennesseans, additional revenue to meet the state's urgent needs, a supportive public, and the related benefits that would flow to everyone. How much political courage do you need to talk that kind of truth?

© 2005 MetroPulse. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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