A constitutional ban on adopting a tax on income passed the Tennessee Senate on March 9. This resolution would render the state forever dependent on our sales tax and tax on groceries. But we now have one of the highest sales taxes and are one of the few states in the nation with sales taxes on grocery foods.
Luckily an earlier provision was defeated that would have abandoned traditional procedure by declaring that posting an Internet notice of the amendment on the Tennessee secretary of state's or the Tennessee General Assembly's website would satisfy the constitution's requirement for official public notice. As a result, the state will continue the long-standing practice of meeting this requirement by posting such notices in newspapers statewide.
Even with public notice in newspapers retained, a constitutional ban on an income tax is bad policy and puts into place a permanent reliance on a regressive form of tax that disproportionately affects lower-income residents.
Last Monday, the governor released his new budget for the coming year. But that budget relies entirely on cuts of several million dollars instead of revenue increases through closing of tax loopholes. So he proposes to reduce state expenses through reductions
in funds to TennCare and public higher education, and by closing several group homes for children and shrinking programs of early education for children, among others. But the state budget had already been reduced, and the state is among the lowest-ranked states in services provided. How do we ever expect Tennessee to get out of the bottom of the state services barrel?
Amending the constitution is a momentous undertaking with long-lasting consequences. It should not be easy, and it should not be attempted without careful consideration. Amending the constitution in a way that limits the General Assembly's future options for generating revenue is a risky proposition and a statement of exaggerated self-esteem. It says "We, in this General Assembly, know every circumstance that could possibly occur in the future. None of them could justify ever having an income tax, and we don't trust our successors in future General assemblies to not pass an income tax."
It's not hard to imagine circumstances that would call for an income tax. A depression or another severe recession might reduce revenue to the extent that an income tax becomes essential to the continuation of a state government that serves citizens adequately.
An earthquake on the New Madrid fault or a severe outbreak of tornadoes will require funding for relief and reconstruction efforts that exceeds the capacity of the existing tax structure, which is so heavily dependent on very high sales and food taxes. With both of these potential disasters, it's not a question of "if" but "when" they will occur, as the tragic events in Japan have so recently demonstrated.
Even without these disasters, Tennessee revenue is down because an ever smaller part of economic activity is subject to our sales tax. Severe cuts in state services have been imposed in an effort to keep the budget balanced. If the proposed amendment passes, it would take at least three years to amend it out of the constitution and pass an income tax. How much would Tennessee suffer in the meantime?
This resolution is an insult to the constitution, its framers and to current and future citizens and their elected representatives. They all deserve more respect.
Phil Schoggen is a past board member of Tennesseans for Fair Taxation. He can be reached at schoggph@ourblakeford.com.