Taxing Issues: Fighting a Ban on Income Tax

TAXING ISSUES: A SIX PART LOOK AT ISSUES THAT HINDER TENNESSEE’S ABILITY TO BE A JUST A PROGRESSIVE STATE.

Part III: Fighting a Ban on Income Tax 

It’s the truth: In Tennessee the poor pay more of their income in state taxes than the rich. In the midst of difficult conversations about the haves and have-nots, however, you may find yourself yearning for a simple solution to the grave injustices of our state tax system. The good news is that there is one, an income tax. The bad news is that the “haves” in our state are working – hard – to ensure that the solution is off the table forever.

Third-party economists and researchers have agreed for years that the solution to our revenue problem is a progressive, broad-based state income tax. It’s the only way to guarantee that everyone pays taxes according to their means. Otherwise, we’re stuck with the system we have now; sales and business taxes have no where to go but up, leaving the poor and middle class to shoulder most of the burden while the rich cut their state services, such as health services, police and fire protection, and education.  

Glen Casada (R-Thompson Station) has introduced a constitutional amendment in the state legislature that would forever ban this type of protection for the poor and middle class. Even worse, he himself seems to be dangerously ignorant of the repercussions. Tennessee could see a $3 billion potential loss in revenue, and in January 2012, when challenged on the house floor regarding the bill’s regressive nature, he stated that an income tax was regressive, thus displaying a disturbing lack of basic knowledge or a blatant disregard of tax structure and history.

A progressive tax is defined as a tax that increases in rate as the payer's income increases. An income tax, for example, is a progressive tax.

A regressive tax, on the other hand, is one whose rate increases as the payer's income decreases. Sales tax , for example, is a regressive tax.

 Senator Borah said in 1909, “the income tax is the fairest and most equitable of the taxes. It is the one tax which approaches us in the hour of prosperity and departs in the hour of adversity. Certainly, it will be conceded by all that the great expense of government is in the protection of property and wealth. There is no possible argument founded in law or in morals why these protected interests should not bear their proportionate burden of government.” But, don’t just listen to Senator Borah, listen to Adam Smith, the father capitalism, who said in hos book, the Wealth of Nations  "The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.” Smith also says "It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

For years, TFT has been supporting this as a solution to Tennessee’s revenue problem and dependency on federal funding. Now, however, despite overwhelming evidence in support of an income tax, Casada and many others in the legislature are threatening to take away this option for Tennessee’s future just to score cheap political points

The bill must receive a 2/3 majority in the house and senate in 2013, then, if it passes, will go on the 2014 general ballot for a vote.

TFT could fight this terrible idea before it goes to the ballot. We, the people of the poor, middle, and upper classes aren’t the only ones who have an interest in keeping our sales taxes low and removing our food taxes entirely: in a state without an income tax option, taxes on small businesses are bound to swell as the need for revenue increases. The strong faith communities of Tennessee have also voiced opposition to this unethical, unjust ban for reasons tied to their belief that opportunities for improvement should not be stacked against the poor. Even legislators who take their roles as civil servants seriously, such as Mike Kernell and Douglas Henry, are opposed to this horrendous bill.

The time to act is now. What do you think? Tell us in the comments below if you think this is an issue for TFT’s 2013 agenda.