Monday, October 20, 2008
Politics / Woods Phil the Ostrich
Posted by Jeff Woods on Mon, Oct 20, 2008 at 8:55 AM
Nonetheless, Gov. Bredesen doesn’t see any need to alter Tennessee’s tax structure. “I don’t think the tax structure really has that much to do with this sort of thing,” he said. “What we have to do is to learn how to manage through the ups and downs.”Sounds easy, doesn’t it? I guess this kind of idiocy out of Bredesen should stop surprising me. But I keep hoping he's going to snap out of it somehow. You’d think Bredesen, facing no political risk anymore, could tell the truth about the state’s tax system.
Comments (4)
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"Brian Miller of Tennesseans for Fair Taxation states the obvious: “What we do know is that the sales tax and our current tax system has been failing us for decades even in good economic times.”
What is obvious is that Miller's group is a booster for a "progressive" state income tax. He isn't any sort of authority on what the proper tax system for the state is.
The state's budget problems have nothing to do with the tax revenue side of the equation - they have to do with the spending side of the equation - as in there is far too much of it and it's being spent on things that are not being paid for by the people on the receiving end.
Fairness in paying for government provided goods and services is no different that fairness in paying for private sector goods and services - on a user fee basis.
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Let's get this straight... the sales tax IS the problem. That's because the sales tax has become increasingly ineffective in a modern economy. With the growth of internet shopping, mail order, and the shift to a service-based economy (services are not taxed under a sales tax), the tax base is shrinking every year. In order to raise the same amount of money relative to the economy, legislators are forced to raise the sales tax rate every eight years or so. Despite the sales tax increases of '76, '84, '92, and '02, taxes as a percentage of income have actually declined over the last 40 years according to UT's Center on Business and Economic Research. While the public is left with the impression that taxes keep going up, the truth is, we're just treading water.
Equally important, endlessly raising the sales tax is not a solution. We are already at the maximum and paying the price for that policy as our retailers are loosing out to the internet and people just driving across state lines to shop. That means Tennessee jobs are lost too.
And yes, the sales tax is unfair to boot. Think of what is taxed: food, clothing, furniture, TVs, cars, cleaning supplies, and home appliances. Now think about what is NOT subject to the sales tax: private school tuition, maid or housecleaning services, attorney fees, accounting service, stocks and bonds, and real estate investments. It doesn't take a rocket scientist to see why the sales tax forces working families in Tennessee to pay over three times the taxes as a portion of income than the state's wealthiest.
A balanced, modern tax system would include elements of both sales and income tax, but at lower rates. With a modern tax system that actually stays level relative to economic growth, our state legislators could focus their energies on the type of long-term planning that it will take to strengthen Tennessee's economy and create jobs, instead of spending all our time and energy coping with one budget crisis after another. We need to move beyond crisis-management as a state, but the only way we can do that is to restructure our tax system.
That's the basic economics of the sales tax. Until Tennessee addresses this underlying structural problem, we'll continue to be mired in crisis after crisis instead of planning for the future.
"In order to raise the same amount of money relative to the economy, legislators are forced to raise the sales tax rate every eight years or so."
It hasn't been established that the state SHOULD be raising the same amount of money relative to the economy on a constant basis in the first place nor has it been established that all the things the state government is currently spending money on are legitimate functions of government.
Legislators are never "forced" to raise taxes - they can cut spending instead.
