Republican-driven resolution would ban state income tax

Thursday, January 13, 2011 at 1:48pm

A majority of both the House and Senate signed up to sponsor a resolution introduced Thursday to amend the Tennessee constitution to ban the state income tax.

"If this amendment passes, Tennessee will never face an income tax battle again,” said the Senate’s main sponsor, Brian Kelsey, R-Germantown.  “Not having a state income tax has already brought jobs to Tennessee, and clarifying this prohibition will help Tennessee become the number one state in the Southeast for high-quality jobs.”

Fifty-one of the 99 House members and 20 of the 33 senators are on the list of the resolution’s supporters. Included are House Speaker Beth Harwell and Senate Speaker Ron Ramsey. A Senate Republican spokeswoman said more sponsors are expected.

Only three Democrats are sponsors — Sens. Andy Berke of Chattanooga and Eric Stewart of Winchester, and Rep. Eddie Bass of Prospect.

The Senate adopted the resolution last year by a vote of 25-7, but it stalled in a House subcommittee. If it passes by a majority in this General Assembly and by a two-thirds majority in the next, it would go on the ballot for voter approval in the 2014 elections.

In 2002, a state income tax won 45 votes in the House. The state Supreme Court has ruled three times — most recently in 1964 — that the constitution already prohibits an income tax. But the state attorney general issued an opinion in 1999 saying the tax was permissible. Kelsey said his resolution is needed to resolve the issue.

“In these tough economic times, Tennesseans need jobs and don’t need to be worrying about having to pay a state income tax,” said Rep. Glen Casada, R-College Grove, the main House sponsor. “It’s time to let the people vote on the issue. This will show companies that hope to move to Tennessee that we are serious about never imposing an income tax.”

23 Comments on this post:

By: richgoose on 1/13/11 at 6:01

Tennessee already has a state income tax (Hall Tax) This is a tax on retirees and the wealthy who gain their income from divdends and bond interest. It is 6% of the total. If you had an auto body shop or small drug store and over the years put your retirement income into stocks and bonds you would be subject to this tax,

$50,000 = 3,000 additional dollars in taxes over and above federal
$100,000=6,000 additional dollars in taxes over and above federal.

I think there is a mimimum you can earn from dividends and interest that is not subject to the tax. It is very minimal.

By: TNCitizen on 1/13/11 at 9:04

Amending the state Constitution to ban an income tax is a colossally bad idea. It will forever tie our government's hands and limit our ability to thrive in Tennessee. What do we do in the case of an emergency such as another depression, a massive outbreak of tornados or an earthquake on the New Madrid fault that requires more revenue to help our citizens and communities recover? It would take 5 years to amend the Constitution to allow an income tax again. In the meantime, the budget must be balanced each year and we would only have an increase in the sales tax to fund the recovery. That would put the cost disproportionately on the poor. Are we really that short-sighted?

By: tv8527 on 1/13/11 at 9:19

Tn citizen it's called living within your means,That's what the rest of us do ...The government should have to as well.

By: Elmer Gantry on 1/13/11 at 10:01

This Amendment to the Tennessee Constitution is to enact an end run deceit around protecting the interests and best benefit of working Tennesseans by making broad and permanent tax cuts for Tennessee’s wealthiest families — this is a blatant attempt by our Lt. Governor and his cronies to eliminate estate and inheritance taxes:

http://www.capitol.tn.gov/Bills/107/Bill/SJR0018.pdf

“The General Assembly shall not authorize any county, municipality, or other political subdivision of the state to tax incomes, payrolls, estates, or inheritances, or to impose any other tax not authorized by Sections 28 or 29 of Article II of this Constitution; and no county, municipality, or other political subdivision of the state shall levy any tax unless the tax is authorized by Sections 28 or 29 of Article II of this Constitution and unless the General Assembly authorizes the county, municipality, or other political subdivision to levy the tax. Nothing herein shall be construed as invalidating the provisions of any municipal charter in existence on November 3, 1953.”

By: Elmer Gantry on 1/13/11 at 10:14

Tax collections continue to decline
Deficit seen in almost all categories
http://myspartanews.com/articles/2010/03/20/news/doc4b9e23148776f159175139.prt

By Kim Swindell Wood
Editor
Published: Monday, March 15, 2010 7:16 AM CDT

Tennessee’s sale tax collections for February are following the same pattern as those in the past 21 months by showing a negative growth since the reported downward spiral began in January 2008.

White County’s specific figures were not available as of press time, but will be provided as soon as the information is available.

According to Tennessee Department of Revenue, the revenue collections for February 2010 totaled $638.9 million, which is $47.1 million less than the amount budgeted by the state. This amount is also a decreases of $29,40,344 from the February 2009 collections.

Dave Goetz, finance and administration commission, stated sales tax comprises almost two-thirds of the state’s revenue. However, Goetz reported that in spite of budgetary challenges, the department has designed a plan for balancing the budget.

...

Franchise and excise tax collections were $34,448,361, an increase of $1,043,176 or 3.1 percent over the collection in February 2009. Separately, franchise tax collections were $12,240,122, a decrease of $2,235,934 or 15.5 percent from last February. Excise tax collections were $22,208,439, an increase of $3,279,310 or 17.3 percent from February 2009.

Inheritance, gift and estate tax collections were $5,764,181, an increase of $1,630,026 or 39.4 percent compared to February 2009 collections.

For more information about revenue collections log onto www.state.tn.us/revenue/

By: richgoose on 1/14/11 at 3:17

You can see by the comments about this income tax the disparity in the lives of Americans.

There are those that realize that giving our state government the power to tax income is an invitation for needless spending.

There are others who are intelligent enough to pass a second year Algebra test but who have been financially unsuccessful. These people must live off the efforts of the successful. The state income tax is another way of getting their hands on other peoples money.

Obviously there are a growing number of people who want to be paid more for being "community advisors"

By: feefifofum on 1/14/11 at 6:54

States WITH income taxes are having falling "revenues", and are the most fiscally unsound. Falling revenues are a sign of a faltering economy, and when that happens EVERYONE cuts back. Otherwise, what happens is what is happening now federally. Debt goes up to the trillions because the government spends more than they have.

This is a GREAT bill to pass. Having an income tax makes it easy for the pols to raise taxes by small percentages (CA is up to 8.5% and STILL broke), versus cutting expenses when times get tough. And for pols, times are always tough because there are always more people wanting stuff than can pay for it. They get others to pay, like ME! Sorry Charlie, ain't gonna happen.

NO INCOME TAX, EVER.

By: girliegirl on 1/14/11 at 8:34

The State of Illinois just declare War on its citizenry and corporations by RAISING income tax levels and corp tax rates! Tenn would GAIN by that state's stupidity...if they'd just woo those companies....starting NOW. ;-)

By: girliegirl on 1/14/11 at 8:34

After all....that's exactly why most corporations moved here from CA in the past decade.

By: TNCitizen on 1/14/11 at 9:10

tv6527, we have lived within our means for 212 years. Every General Assembly has complied with the state Constitution by passing a balanced budget. Tennessee is one of the 5 lowest-tax states in the country. The problem is that, due to our reliance on sales tax, the revenue has been extracted disproportionately from low-income families. The bottom 20% pay 11.7% of their income in state and local taxes while the top 20% pay 4.5%. That's upside-down.

By: TNCitizen on 1/14/11 at 9:27

girliegirl, no, the companies located here because we bribed them (or paid the extortion money they demanded). That's where our taxpayer dollars have been going, not to social services. If they located here because of our not having an income tax, they're in for a nasty surprise. It's called the Hall income tax! We have a robust corporate income tax. If they decided to locate here because of our anemic personal income tax, they violated their duty to the shareholders and decided based on personal benefit, not shareholder benefit.

By: pswindle on 1/14/11 at 11:16

What a bad idea. No one likes to pay taxes, but the state has to have enough money to stay open. We may never need an income tax, but don't make a law like this because we do not know what wil happen down the road. I cannot understand why he GOP can not understand that it takes taxes to run everything in our government. Everyone wants their share, but no one wants to pay.

By: JDG on 1/14/11 at 11:21

TNCitizen

If your numbers are correct, and I have no reason to believe otherwise, then let's take a reality check. I am not sure what the average monthly take is in state sales and use tax, but for the sake of the argument let's use 100,000,000. That means that the bottom 20%, the lowest income families, would pay 11,700,000 while the top 20% would pay 45,000,000, or 4 times as much in real dollars. Remember, this is basically a consumption tax, being paid by those who actually use, or use up, a resource so those who use, pay.

One other question. regarding your "tax spend" numbers, I am at a littile bit of a loss as to how a family can spend more than the 9.35% of their income on sales tax. That is the top end of the sales tax rates in Tennessee, and should be the cap if a family spent 100% of their income on sales tax related items.. (we know that is not the case because food is taxed at a lower rate.) Is there an explanation I am overlooking?

By: TNCitizen on 1/14/11 at 11:26

to JDG: the 11.7% is for all state and local taxes, including property taxes, gasoline, cigarettes, alcohol, and the pass-through costs of corporate taxes. See the "Who Pays?" report from the Institute on Taxation and Economic Policy: http://www.itepnet.org/state_reports/whopays.php

By: brrrrk on 1/14/11 at 11:34

I'd have no problem with this (constitutionally doing away with the state income tax) if and only if the state also passes a law that would make it illegal for the state to balance their budget off the backs of the Federal Government and Federally collected taxes from other states. Since 1981 the state of Tennessee (and most other conservative states for that matter) has never once paid more in Federal taxes than they received in Federal funding. You can't have your cake and eat it too.

By: brrrrk on 1/14/11 at 11:43

TNCitizen said

"That would put the cost disproportionately on the poor. Are we really that short-sighted?"

Yes. Besides, where have you been? Don't you know that the poor are poor because they're lazy, stupid, non-god fearing people; as opposed to the rich who are hard working, smart, righteous people? Why should the poor get a break?

By: JDG on 1/14/11 at 12:13

So, consumption, excluding property taxes, including things that are most certainly discretionary? 3 Possibilities: Earn more, consume (spend) less on discretionary items, or use the tax code to redistribute money to the poor from people who have "too much", even though those who have "too much" are already paying 4 times the amount in real dollars. And never mind the fact that those who actually control the spending of tax collections are not to be trusted, regardless of the source of the income, to utilize it in a manner conducive to the betterment of the general welfare.

Final thoughts - You use it you pay for it!

GIVE a man a fish and he can eat today, TEACH a man to fish and he can eat forever. Sounds like someone needs to LEARN how to fish.

By: TNCitizen on 1/14/11 at 2:20

to JDG: on your first question the percentages are of the taxpayer's total income, not of the revenue the state collects.

By: richgoose on 1/14/11 at 2:25

BRRRK.........There is certainly some validity in your rebuttal to TNCITIZEN.

i overhead a late middle age waitress say to one of her associates that her daughter wished that she had a little extra money but never does. She is a divorcee with three children and a dead end job.

The victims are those children who should have never been brought into this world. The poor breed poor.

By: TNCitizen on 1/14/11 at 2:28

to JDG: where do you get 4 times as much in real dollars? Your calculation was 11.7% of $100,000,000 for $11,700,000 and 4.5% for $45,000,000. You're off by a factor of 10. Should be $4,500,000. Except that's not what the percentages are based on. It's percentage of total income for the taxpayer. You can't calculate the real dollar amounts from that information. It's the percentage of income that matters anyway. Would you say that someone who earns $15,000 should pay the same real dollar amount of taxes as someone who earns $1,000,000?

By: brrrrk on 1/14/11 at 3:35

richgoose said

"BRRRK.........There is certainly some validity in your rebuttal to TNCITIZEN.

i overhead a late middle age waitress say to one of her associates that her daughter wished that she had a little extra money but never does. She is a divorcee with three children and a dead end job.

The victims are those children who should have never been brought into this world. The poor breed poor."

What do Sheldon on The Big Bang Theory and richgoose have in common? It appears, the ability to recognize sarcasm.

By: richgoose on 1/14/11 at 6:31

brrrk......I do recognize it and use it many times for my own entertainment.

By the way I don't always agree with your position but I enjoy your posts. You have always have a message to think about..

By: JDG on 1/18/11 at 11:14

Apologies for the miscalculation, I was obviously thinking along the wrong track. My basic premise remains the same, and no, I do not believe in calculating taxes on consumption on a percentage basis. Real dollars are the only thing that matters when you speak of contributuion to the tax base and the "rich" pay a much higher percentage of the total real dollars of tax collections. And again, it is a consumption tax, you pay for waht you use or use up.
Your last sentance is completely off mark. Using your numbers a person who pays 11.4% of total income and makes $15,000 pays $1,710. The millionaire pays $45,000 so it is an even higher discrepancy than originally stated.