Thursday, July 01, 2004

Taxes Are Ever With Us

A couple of bits on the Tennessee income tax front.

First, an early indicator of the likely recommendation of the Tennessee Tax Structure Study Commission comes in this nasty column by Grover Porter in The Tennessean. The TTSSC was a parting indignity inflicted on Tennesseans by outgoing Governor Donald Sundquist and his partner in almost-crime House Speaker Jimmy Naifeh. It's mission: to produce a report, for the subsequent governor, about Tennessee's tax structure and make recommendations about what to do.

Given that the TTSSC was stocked with pro-income tax folks by both Sundquist and Naifeh, most folks have correctly guessed that it will recommend an income tax. They will repeat the mantra that a sales tax is inelastic, even though Tennessee's sales tax is producing $300 million more than expected this year. They will recommend moving to a mix of sales and income taxes as a "protection" against future economic downturns.

I'd offer two counter-proposals. First, legislators need to be serious about the Reserve Fund in flush times, and fill it up. We know bad days will come again, though we can never predict when. Instead of squandering money as the Assembly did in the Nineties boom, some must always be set aside.

Second, close the loophole that allows the Legislature to routinely side-step the Constitutional provision that all of their budgets be balanced. This loophole allowed the Legislature to bust the cap during the boom years and drive spending up to astronomic levels, all with Sundquist's approval.

Reining in spending, as has happened for the most part under Democratic Governor Bredesen, would be an obvious smart move, too.

Giving our legislators both an income tax and a sales tax, as the study will likely suggest, is a recipe for drunken spending. They have yet to prove they can stay within limits. Having two revenue streams to play with, no matter what their assurances of fiscal restraint, is a dangerous thing: like giving children both matches and gasoline.

There's talk that the TTSSC's report, scheduled to be released this summer, may be delayed until after the Fall elections. Reminding voters of past behaviors, and drawing attention to current ones, isn't something our legislators want to do. I'm guessing it likely will be held back, then taken up in the next Assembly when we'll suddenly learn that there's a "backlog of spending needs" that "have to be addressed."

On a different front, Bill Hobbs points us to a great response from blogger Mark Rose, whom half-Bakered readers were introduced to yesterday. Rose tackles the duplicity of Tennesseans for Fair Taxation, a pro-income tax front group in league with the Tennessee teacher's unions.

TFT is claiming that a pending bill in the US Congress to allow Tennesseans to deduct their sales taxes from their Federal income tax is unfair to Tennesseans somehow. Rose finds a TFT publication on their own website where just two years ago they were touting the ability to deduct State income taxes as a selling point for the State income tax! Hypocrisy exposed.

It's a shame that these kinds of maneuverings aren't reported as regularly, nor as prominently, as they used to be by our Commercial Appeal and the television stations that follow its lead in State political reporting. People sticking their hands into your pocketbook or wallet to hand money to their friends and potential voters is as close to home as it gets.

Tennessee is running a $300 million revenue surplus from the sales tax that was increased just two years ago. Cutting the sales tax by 1/4 of a cent would bring present revenue back to parity this coming year while still growing even more as the economy continues to improve. That quarter-point sounds small, but the symbolism is huge. So is the reutrn of $300 million to our hands. Some of that will be taken by our County soon, now that schools are pressing for more money yet again. We could use that $300 million, one way or another.

So give it back!

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