A Closer Look at Income and Tax Inequality in Tennessee

The Occupy Wall Street movement is gaining steam daily. The statistics regarding income inequality in the U.S. to which the movement has brought attention is staggering to say the least. These statistics got me thinking: what do the top earners in our state make and how does that translate to the regressive tax system in Tennessee?

Statistics regarding income in Tennessee are sparse at best; I found the most detailed statistics regarding income inequality in Tennessee on the IRS website from their most recent 2004 report. What the data from the report shows is that the top 2% of households in Tennessee have an adjusted gross income of $537,000 per year, compared to the average $19,500 adjusted gross income for the most populated under $50,000 tax bracket. Indeed, 74% of Tennesseans fell in this lowest tax bracket. The percentages of Tennesseans in the other tax brackets were as follows:

• $50,000-$75,000: 13%


• $75,000-$100,000: 6%

• $100,000-$200,00: 5%

• $200,000 and up: 2% (the top two percent mentioned above as earning a mean of $537,000)

The spreadsheet to which I am referring for these statistics can be downloaded here.

Keep in mind that the income gap has likely grown since 2004, since total income in Tennessee has increased since then (as shown by the chart below), while the median household income in Tennessee has not experienced much change.

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Now, what does this say about the way Tennessee taxes its citizens? Well, quite simply, it says it is backwards. For instance, the 74% of Tennesseans in the lowest tax bracket are likely spending every last dime of their income, and 70% to 80% of this income is spent on taxable goods and services.

On the other hand, those in the top two income tax brackets (7% of Tennesseans) only spend about 20% to 30% of their income on taxable goods and services.

Put simply, this equates to a tax system where tax rates go down as incomes go up--a regressive tax structure. It is unfair to ask the average Tennesseans, the 74%, to carry the tax burden; this burden should be shifted to those who can afford it--the top 7%. This could be accomplished by implementing a state income tax which would therefore allow the state to drastically reduce our sales tax rate, one of the highest in the nation, and eventually eliminate the sales tax on food, also one of the highest in the nation (not to mention Tennessee is only one of a handful of states who even tax food).

Please join us in our fight against regressive taxes in Tennessee by taking action. Also, follow us on Facebook to stay updated on our fight for fair taxation in Tennessee.

TFT has been BUSY!

Amazon victory and much more! Check out the video below for more.

The Amazon Discussion

We've had a lot of great conversations with members and the public recently about the Amazon issue. Some of our members don't understand why we would fight the job creation - TFT wants new jobs for Tennesseans. But the jobs Amazon creates could provide an unintended consequence statewide when thousands more lose their jobs as a result of local employers closing their doors because they can't compete with Amazon's unfair tax advantage.
Others question why we would advocate for any kind of additional sales tax. The fact is that Internet sales are legally required to be taxed when the vendor has a physical presence in Tennessee. This applies fully to Amazon's distribution centers in Bradley County and Chattanooga and to the proposed fulfilment center they announced today they plan to build in Lebanon, TN.
Until we can reduce the general sales tax and eliminate the tax on food, legally obligated tax revenue must be collected to avoid further cuts in health care, public services, and education. Shoppers who buy on Amazon.com must have a credit card, a physical address, and access to a computer and the Internet - these tend to be shoppers who are not low-income. If these purchases (that are likely not basic necessities) are exempt from sales tax, that's one more disadvantage handed down to low-income shoppers in Tennessee.
It's not fair to our local businesses who must collect the sales tax. It's not fair to those impacted when jobs and services are cut and lost because of a lack of state revenue - revenue that Amazon sales taxes could more than cover for the state.
This article from TN Report says it all:
- Dr. William F. Fox, director of economics at the University of Tennessee’s Center for Business and Economic Research, joined North Carolina’s secretary of Revenue, David W. Hoyle, in a presentation, and the message they brought was that Amazon has managed to create an uneven playing field and that Internet sales in general are having a huge impact on state revenues.
- Fox said his center’s research estimates the total of e-commerce is about $4 trillion, with about $46 billion in taxes due across the nation. He said most states surveyed are going to lose about $200 million or more this year due to uncollected taxes on e-commerce.
- “As we move from people who buy on Main Street, and they move to buy from Amazon because of the tax subsidy that is implicit in the way we pay, we cost the economy four jobs,” he said.“This is not a little issue. It’s not a small concern,” Fox said. “They don’t need a subsidy to operate. E-commerce associated with business-to-consumer sales this last year grew 18 percent, while commerce on Main Street essentially grew zero percent.”

Amazon: The World's Leading Tax Cheat

Business Insider has this article calling Amazon the leader of the Tax Cheat Industry:
Amazon is known throughout the world as one of the most innovative tax cheats anywhere. It makes its profit largely by allowing customers to avoid state sales taxes and sharing the savings. States are now taking steps to crack down on this scam, requiring Internet retailers with any ties to in-state businesses to start collecting taxes on their sales in the state. California took this route this month.
The NYT had an article highlighting Amazon's efforts to fight back to protect its loophole, which includes a plan to place an initiative on California's ballot. In laying out Amazon's argument, the piece includes an unanswered argument from Amazon, that the law places a huge burden on small Internet retailers by requiring them collect taxes in hundreds of different jurisdictions.
The piece should have reminded readers that there are services that will handle the tax collection for smaller businesses for a modest fee. These services are comparable to the payroll companies that small businesses often rely upon to get tax and benefit payments handled correctly.
Amazon has a history of putting out absurd arguments to protect its tax loophole. It had previously argued that it lacked the technical competence to keep track of the different tax provisions in all the jurisdictions where it sold products. This argument was contradicted by the fact that retailers like Wal-Mart and Target seem to have relatively little problem getting tax collections mostly right. Presumably, the programmers at the these traditional brick and mortar retailers are not that much more competent than the crew at Amazon.
Given Amazon's history, the NYT should not present its claims to readers without including a response.

11 Things the Richest U.S. Households Could Buy (You'll Be Shocked)

From our friends at United for a Fair Economy:

The wealthiest families in the U.S. are sickeningly, obscenely rich, to the tune of $1.37 trillion dollars. And unlike the rest of us, they don’t have outstanding medical bills or student loans, trouble paying credit card debt, or live paycheck to paycheck.

So how much is $1.37 trillion dollars? To demonstrate just how much money this is, here are 11 things that the richest 400 households in the U.S. can buy with their "hard-earned" cash:

The richest 400 households can pay off every student loan for every single student in the entire United States. No more paying for an education, so that you can get a good job so that you can... well, pay off your education.
The richest 400 could pay your rent, and the rent of every single renter in the entire United States for three years.
The richest 400 could pay the mortgages of every house in the whole country for 14 full months.
The richest 400 households can buy every single house that was foreclosed on in 2007 and 2008.
The richest 400 households could pay the annual salaries of 19 million families for one year. So go ahead, take that year-long, family vacation around the world you’ve always dreamed of.
The richest 400 can pay off all credit card debt for every single person in the entire United States. Imagine that! No more credit card debt looming over your shoulders!
The richest 400 households can afford to give a $10,000 bonus to every single worker in the entire country. What would a hardworking person like you do with that extra money?
The richest 400 can afford to buy a new car for every family in the United States. Meanwhile, many of us must ignore the flashing check engine light.
The richest 400 can pay for 3 ½ years worth of gas for every driver in the country.
The richest 400 households can afford to triple the number of teachers in the United States, then give every single one a $30,000 raise. Teachers are being laid off everywhere, their salaries are being cut, and they are suffering. Teacher-to-student ratios in schools are abysmal. But what can we do about it when so much wealth is in the pockets of so few families?
The richest 400 families alone could replace 70% of all money lost in the Great Recession, for everyone! How much money did you, your parents, or grandparents lose in the Great Recession of 2008? 30%, 50% of your portfolio? Not only do the rich still have enough money to fund their wildest dreams, but they can also fund your retirements.

As you can see, the wealthiest families in the U.S. are doing just fine. And with this money has come a great deal of political influence, often in the form of tax breaks and tax loopholes. Their influence on policy has made it easy for the rich to stay rich [and get richer].
To see the full article, go here

Amazon pays taxes in Europe, but refuses in Tennessee. : New Video

More Evidence Supporting the Need for a TN Income Tax

This report from the Center on Budget and Policy Priorities, Better-Than-Expected State Tax Collections Highlight Importance of Income Taxes, has some great information supporting TFT's work to implement a personal income tax in Tennessee.
Some highlights:

At least 28 states have reported that tax collections for the just-ended fiscal year will exceed the amount expected when their budgets were adopted last spring. In 23 of those states, the improvement is driven by gains in income tax collections—a result of rapid increases in the incomes of wealthy individuals and corporations over the last year. (Aside from North Carolina, the exceptions don’t have a personal or corporate income tax or both.)

On average, in the 28 states with higher-than-expected growth, personal income taxes have grown 9 percent over last year. That jump is more than double the 4.4 percent growth rate that was anticipated when these states’ budgets were enacted. Sales tax growth is only about 1.5 percentage points above the 2.9 percent originally projected.

Increases in corporate profits and rising incomes for individuals and families—especially the wealthy—have fueled the boost in revenues. Personal and corporate income taxes are significantly higher than expected, while sales taxes generally are much closer to targets. These gains in personal or corporate income tax collections led to higher-than-expected revenues than had been forecast when the budgets in at least 23 states were adopted last year.
The Great Recession appears to be following the pattern of recent recessions where the incomes of the wealthy recover well before those of low- and middle-income individuals and families. For example, during the economic expansion that followed the 2001 recession, the average inflation-adjusted income of the bottom 90 percent of households grew just 4 percent while the incomes of the top 1 percent grew more than ten times faster (by 62 percent). Many experts expect a similar pattern now.

To read the full report, go here