Every year, a group called ‘Tennesseans for Fair Taxation’ tries to talk the state into passing a tax system that takes less money from poor people. Last week, the group announced the slate of bills it supports in this legislative session.
John Stewart chairs Tennesseans for Fair Taxation, a coalition of groups including labor, advocates for the disabled and the poor, and several religious organizations.
Stewart says poor and middle-income Tennesseans are carrying a system where state and local taxes take 12 percent of the income of the poor, but only 3 percent from the very richest.
He says the state relies on a sales tax and a broad spread of government “fees” that add to the burden.
“It’s a bunch of very short term fixes that offers no long term hope for the state, no long term vision for where the state should be is going, and you know, save a million here and a million there. I mean, that’s fine, but next year it’ll be another bunch of band-aids and baling wire.”
Tennesseans for Fair Taxation have proposed new laws that would cut the sales tax, end sales tax on food – and create an income tax. That idea was shot down in 2002. Even Stewart admits it probably won’t fly this year, but he says his group will keep fighting for the proposed changes, which he claims would result in 70 percent of Tennesseans paying less in taxes.
Stewart cites figures that show that between the year 2000 and 2008, Tennessee lost jobs, increased its unemployment, and generally added to the number of people in poverty. At the same time those people needed more government services, he says, Tennessee’s heavily-burdened sales tax stopped performing, giving government fewer dollars to meet those needs.
But it wasn’t much better back in the 1990s, when there was a run-up in national wealth as measured by stock market indices and property values, he says.
“The sorry truth is that Tennessee didn’t do better, back in the ’90s, when everybody else was doing well, in terms of state revenue.
Because our tax system is an upside-down tax system, that doesn’t function properly. And it’s outdated. It was established back in 1923, and I guess the world has changed a little bit since then.”
At the turn of the century the state had a chance to address what he terms a “regressive tax system,” when lawmakers were (by some counts) within a few votes of passing a state income tax.
That failed in the face of an uproar of anti-income tax sentiment that culminated in parades of private vehicles circling legislative offices, honking and yelling. Once more, Stewart says, lawmakers fell back on the broad sales tax.
“The only reason we got out of the mess we were in at the end of the ’90s, was that after a battle of historic dimension back in 2002, the legislature increased the sales tax by a full percentage point, making it the highest sales tax in America.”
And that generated more than a billion dollars of additional revenue, just when Governor Bredesen came into office.
It essentially was the boost that got him through his two terms as governor.
Tennesseans for Fair Taxation is pushing these bills:
SB3235 Tate/HB3597 Johnnie Turner, Tax Cut & Jobs Creation, flat tax
It would impose a flat rate income tax at 5.5 percent.
SB3236 Tate/HB3596 Johnnie Turner, Tax Cut & Jobs with two tax rates
Same bill but with different rates, a 3 percent rate on the first $30,000 of income over the exemptions (“floor”) and 6 percent on higher amounts.
SB2054 Tate/HB2182 Johnnie Turner, Tax Modernization & Economic Stimulus Act
Includes a graduated income tax of 3.5 percent to 7.75 percent.
SB1741 Marrero/HB1947 Shaw, Internet parity bill
Extends sales tax to items sold over the internet if the shipper has an “independent contractor” soliciting business in the state. Today it would only be taxable if the shipping business has a business outlet in the state.
SB0502 Burchett/HB1350 Sargent. Food and Business Tax Fairness Act
A “combined reporting” bill that would keep businesses from artificially shifting their Tennessee profits to other states (Nevada, Delaware) where they wouldn’t be taxable. The only bill on the agenda sponsored by Republicans, this one would (according to the legislature’s Fiscal Review experts) bring in an additional $20 million a year from businesses, while writing off about $36 million the first year from lost revenue from food sales.
Notes on above bills:
Most of the lower numbers were filed in 2009 and are in holding patterns in various subcommittees which haven’t done much with them. Even advocates believe that pattern will continue.
Senator Reginald Tate is a Democrat from Memphis.
Representative Johnnie Turner is the widow of the late state Rep. Larry Turner, who originally sponsored many of these bills. Turner is a Democrat.
Senator Beverly Marrero is a Democrat from Memphis.
Representative Johnny Shaw is a Democrat from Bolivar.
Senator Tim Burchett is a Republican from Knoxville.
Representative Charles Sargent is a Republican from Franklin.
John Stewart, chairman of Tennesseans for Fair Taxation, is the father of Mike Stewart, Democratic representative from District 52 in Nashville. John Stewart says he has no promise from Mike Stewart on how the representative will vote.