Tennesseans for Fair Taxation

Tennesseans for Fair Taxation (TFT) is a Tennessee political advocacy group advocating tax reform, particularly at the state level.

As a grassroots group of generally low and moderate income families, Tennesseans for Fair Taxation is allied with state public employee and schoolteacher groups in establishing a progressive, broad-based state income tax. This group notes that Tennessee is shown by almost all objective measures to have one of the lowest per capita burden of the fifty U.S. states but that the burden is disproportionately placed upon poorer people. This is because the majority of state tax revenues in Tennessee are derived from a sales tax. In Tennessee, food for human consumption is taxed at 6% and most other items of commerce at 7%, with local jurisdictions empowered to add as much as another 2.75% to this, making the overall sales tax rate in many jurisdictions, including the major urban areas, 8.75% on food and 9.75% on other items.

Argument

The argument advanced by TFT is a twofold one. The first point is that Tennessee governmental services are as a whole inadequate, in large part due to an inadequate tax base, and that this disproportionately affects the poor. The second is that the poor pay a share of tax all out of proportion to their income in that most poor people consume the entire amount of their income and are hence taxed upon all of it, whereas most wealthier people invest some or much of their income and hence are not taxed on it by the state. Therefore, the argument goes, the poor are disproportionately taxed by the existing Tennessee system.

A further point made is that due to the size and shape of Tennessee and the location of its major population centers, half of the population of the state lives within 20 miles of at least one other state and that all of the population lives no more than 65 miles from at least one other state, and that all of the surrounding states have a lower overall sales tax rate than Tennessee, meaning that many Tennesseans tend to make many purchases, especially major ones, in surrounding states, with Tennessee receiving no revenue from such transactions whatever, in essence making Tennesseans major taxpayers in surrounding states.

TFT also made the point that even many affluent Tennesseans could benefit from the fact that state income taxes are deductible from for purposes of computing liability for federal income tax, whereas sales taxes (as of 2003), were not. The Congress changed this in October 2004.

Counter argument

The counter-argument is made by groups such as Tennessee Tax Revolt. First, that the "overall" burden of taxation imposed by all levels of government, including the federal government, shows that poorer Tennesseans, like poorer Americans in general, pay a lower share of their income in taxes overall than wealthy ones. They add that food purchased by persons receiving benefits such as food stamps is automatically tax-exempt. Further, they argue true "fairness" is epitomized by the sales tax, which is the only tax which directly affects persons who work in the so-called underground economy which is driven by cash. Hence it represents the only tax paid by undocumented aliens, drug dealers, pimps and prostitutes. They further point out that Tennessee does impose a flat income tax of 6% on dividends and some interest. This income tax is paid almost entirely by more affluent Tennesseans, since the first $1250 of such income, and all such income from bank interest payments, is exempt.

Goals

TFT hopes to overcome the general resistance to a state income tax by showing that somewhere between two-thirds and four-fifths of all Tennessee residents would pay less tax by switching to an income-tax centered system of taxation. Their current literature suggests that the overall sales tax rate could be lowered to 5.75% and more revenue still be generated by the state with the implementation of a modest income tax. Opponents argue that there would be no guarantee that the sales tax rates, once lowered, would not soon be raised again.

External links

* http://www.yourtax.org