Proposed State Tax Reform
April 01, 1999
As important a matter as reforming the tax system is, I feel I must share
my thoughts on the issue.
Sure the sales tax on food is regressive. But the sales tax itself is
regressive as a means of generating income for the state. Removing the
sales tax option from grocery foods is not "fair" as it has been
described. The future of the state is the responsibility of all
Tennesseans. The tax on food is the only means some have to contribute to
its future.
The "fair" way to address the sales tax, is to reduce the sales tax rate
across the board. Any time there are 'targeted' tax cuts, they are by
definition unfair.
Do we create a state income tax as an alternative? Will Tennesseans agree
to amend the constitution for this purpose? It is not as 'shiny' as a
state lottery. If there is a state income tax, will it be fair (i.e. flat
tax across the board), or will it penalize those who are successful?
And if we do create a state income tax, will the state sales tax be
removed? How many times has the government removed taxes? If we do
support a state income tax, what guarantee do we have that the sales tax
will be eliminated? This is why I would oppose a state income tax.
Like it or not, the income tax would be the best means for state income.
It isn't regressive like the sales tax scheme. However, we MUST NOT be
tricked into having both!
The proposed change in the excise tax has problems as well. Particularly
the change to "tax all payroll over $72,000 per person". Any way you slice
it, it is a tax on payroll. Maybe not paid directly by the employee, but
definately indirectly. Or passed along to consumers. If you're going to
tax payroll, call it what it is... a payroll tax, or income tax.
Lowering the franchise tax rate and applying it to all businesses removes
loopholes in the law. These loopholes should be closed, and the law should
apply to all. However, the tax on "gross receipts" is horribly flawed.
Why is it that a company with high receipts, but no profit should be taxed
for failure? The loss alone is enough for any business owner, but to pour
salt into a wound by taxing them in addition is just immoral. Afterall,
isn't that why we pay sales tax as it is?
This proposal is full of problems. I'm not an economist, nor do I have all
the answers. These are simply my thoughts on this issue.
